A comparison of system dynamics between time-based and quantity-based VMI consolidation replenishment system

Abstract

In this paper, we present system dynamics models of a time-based consolidation replenishment system in VMI (TCR-VMI) and a quantity-based consolidation replenishment system in VMI (QCR-VMI), which focus on the effects of replenishment cycle or economical replenishment quantity on system dynamics and bullwhip effect in supply chain. We design practical dynamic simulations under a sequence of random demands to explore the system cost and bullwhip effect under different replenishment cycle in TCR-CMI and those under different replenishment quantity in QCR-VMI. The results show that the bullwhip effect is becoming more and more evident as a replenishment cycle is getting longer in TCR-VMI or an economical replenishment quantity is getting larger in QCR-VMI, and the curve of system cost is a kind of concave function with economical replenishment quantity or replenishment cycle. In comparison, the bullwhip effect in QCR-VMI is a bit stronger than that in TCR-VMI. However, the system cost in QCR-VMI is less than that in TCR-VMI. Finally, we present comparisons and analyses of policy points such as appropriate situation, implement condition and etc. between QCR-VMI and TCR-VMI, we believe that models and analyses presented here provide a basis for finding an agreeable replenishment cycle or an economical replenishment quantity in VMI for coordinating system costs reducing and bullwhip effect controlling in supply chain.