Abstract
Recent research has shown the importance of improving the supply chain competitiveness by means of strategic alliances. This study considers the retailer–supplier partnership through a vendor managed inventory (VMI) system. The characteristics of a VMI system and a retailer–supplier power relationship are discussed in some detail with a case illustration to examine the practical implementations of the system in the Taiwanese grocery industry. VMI not only has the ability to reduce costs, but also to improve service levels and create business opportunities for both parties in the supply chain. Thus, it is considered as one of the main systems in a strategic alliance.
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