Supply Chain Learning and Spillovers in Vendor Managed Inventory

Abstract

ABSTRACTDespite extensive literature on the value of supply chain collaboration programs, little research has examined the issue from the perspective of organizational learning. Using a unique, operational level dataset, we empirically examine the learning curves through which performance improvements are realized under vendor managed inventory (VMI). Performance is measured at the downstream distributor locations by examining inventory levels after controlling for customer service performance (stockouts). We identify and assess three sources of learning: a supply chain dyad's self‐learning, learning spillovers from electronic data interchange (EDI), and learning spillovers from other supply chain dyads. We find that self‐learning, learning spillovers from EDI, and learning spillovers from other supply chain dyads, all have positive and significant impacts on a distributor's inventory performance. In addition, we find that self‐learning may exhibit a U‐shaped learning curve (i.e., performance first improves and then plateaus or declines). These findings suggest that the various learning experiences with VMI and EDI can lead to improved performance over time, but the path to improvement may be complex.