Shipment consolidation in a multiple-vendor–single-buyer integrated inventory model

Abstract

This paper studies the case of a single buyer sourcing a product from multiple vendors. To reduce transportation and handling costs, the buyer has the option to assign vendors to groups. The vendor groups then deliver their batches jointly to the buyer. The paper shows that consolidating shipments may lead to a significant reduction in total cost. Numerical studies indicate that deliveries should be scheduled in such a way that the buyer receives large shipments at the beginning of the delivery cycle and small shipments at its end. The results also suggest that vendor groups with high (low) production capacities should be scheduled to deliver their shipments towards the end (beginning) of the delivery cycle.