Vendor Managed Inventory Model Research Articles

Vendor Managed Inventory models under contractual agreement

The purpose of this paper is to explicitly include a contract between the vendor and retailer in a two-layer supply chain under VMI initiative. Two models are developed, one for a decentralised supply chain where the vendor and retailer determine their operating policies independently. The other model, however, is for centralised supply chain under VMI contract. The saving realised by implementing VMI initiative is distributed between vendor and retailer according to some weight such that no party incurs more cost than that generated by the decentralised supply chain. Also, solution procedures are devised based on Kuhn-Tucker conditions.

Design of vendor managed inventory system for automotive company - a case study

The practice of supply chain management has shifted the responsibility for inventory control to the vendors, leading to the concept of vendor managed inventory (VMI). In order to meet customer demands, vendors must ensure appropriate quantities of storages at the point of demand and must ensure optimal distribution plans that include routing of the distribution vehicles. This paper discusses a detailed literature review of VMI. Existing VMI model for an automotive company is studied in detail and the critical flaws in the present system are identified. This paper proposes information sharing methods, empirical model for supplier segmentation and proposed VMI system with necessary implementation steps for the case company.

Vendor-Managed Inventory model for single-vendor single-buyer Supply Chain

In this paper, a mathematical model for the single-vendor single-buyer problem under VMI configuration is considered. In particular, the contractual agreement between the vendor and buyer is explicitly included. This contract includes an upper limit on the buyer's inventory level such that the vendor is penalised for items exceeding this limit. The purpose of this upper bound is to protect the buyer against excessive inventory. An algorithm is devised to solve the proposed model. Moreover, sensitivity analysis is conducted to show the effect of key parameters of the model on the optimal solution.

A simulation of vendor managed inventory dynamics using fuzzy arithmetic operations with genetic algorithms

This paper develops a new simulation method for vendor managed inventory (VMI) model based on fuzzy arithmetic in the supply chain (SC). The traditional VMI model has been successfully used to reduce the “Bullwhip Effect” in the SC. Thus, in real industry the VMI model can be observed that some variables/parameters may belong to the uncertain factors. Therefore, the traditional VMI model may need to be extended to treat the vague variables or parameters. This study develops a fuzzy system dynamic to simulate vendor managed inventory, automatic pipeline, inventory and order based production control system (VMI-APIOBPCS) model based on fuzzy difference equations, and these operators of difference equations adopt the weakest t-norm ( T W ) operators. Based on the weakest t-norm operators we can get the approximate result using sup-min convolution for simulating fuzzy VMI model, and the fuzzy VMI model can be easier simulated under uncertain environment Moreover, the results of fuzzy VMI-APIOBPCS model can provide the whole extended information regarding the system behavior uncertainties for the decision-makers with fuzzy interval. Furthermore, the study uses genetic algorithms (GA) to search optimal parameters of fuzzy VMI-APIOBPCS model. The performance of Bullwhip measures shows that fuzzy VMI-APIOBPCS model also can reduce the “Bullwhip Effect” as crisp VMI model which can be evidenced by analysis of variance (ANOVA), and the performance of integral of time × absolute error (ITAE) shows that the fuzzy VMI model outperforms previous method with fixing customer service level.

Analyzing the evolutionary stability of the vendor-managed inventory supply chains

One of the widely used strategies for achieving system integration in the arena of supply chain management is the vendor-managed inventory (VMI) approach. Although there exists a large amount of literature that examines various aspects of VMI, little looks at how this model evolves as the implementation progresses and matures. Therefore, this paper shows how to analyze the intrinsic evolutionary mechanism of the VMI supply chains by applying the evolutionary game theories. It is found that during the early stage of the VMI implementation, the upstream supplier will have some profit loss; however, as the transaction quantity increases in the long run, which will eventually benefit the entire chain, it is necessary for the downstream buyer to share profit with the upstream supplier to cover the supplier’s initial loss in order to exploit and sustain the benefits of the VMI. Additionally, the impact factors for VMI to become an evolutionary stable strategy are examined. All the results identify the conditions under which the VMI model is favorable over the traditional chain structure and shed lights on when and why collaboration is critical for a successful, long-term implementation of VMI.

Cadeia de abastecimento: gestão do estoque pelo distribuidor

Este artigo trata do fluxo de informação e material em uma cadeia de abastecimento de produtos de consumo de quatro níveis. Propõe-se que, pelo menos sob determinadas condições de contorno, os sistemas de gestão nos quais o distribuidor coordena os fluxos de informação e de produtos acabados na cadeia (aqui denominados Estoque Gerido pelo Distribuidor - EGD ou DMI) têm vantagem em comparação com o conceito tradicional de Estoque Gerido pelo Fabricante (EGF ou VMI). Além da avaliação da proposta nas dimensões estratégica e econômica, um modelo de simulação numérica é construído para o estudo do comportamento dinâmico da cadeia. Demonstrou-se que o modelo DMI proporciona posicionamento estratégico e econômico mais sólido ao distribuidor, nas condições analisadas. A análise dinâmica revelou que o modelo é estável, e a simulação permitiu à cadeia específica estudada enfrentar incrementos de 20% da demanda normal com estoques 55% menores no varejo e 33% menores no distribuidor que o modelo VMI de referência.

Optimising performance with distributor managed inventory in a FMCG supply chain

This paper deals with the flow of information and material throughout a four-level Fast Moving Consumer Goods (FMCG) supply-chain. We conclude that under certain circumstances, the coordination of information and material flows along the supply chain should be done by the distributor, in an arrangement called Distributor Managed Inventory (DMI), a significant departure from the more traditional best practice concept of Vendor-Managed Inventory (VMI). We analyse a DMI model from both the strategic and the economic perspectives and also analyse its dynamic behaviour by using a numerical simulation model built for this specific purpose. Our dynamic analyses revealed that the DMI model is stable, and its simulation study showed, in terms of performance measures, that the analysed four-level supply chain could cope with increments of 20% of the normal demand level with 55% less inventory at the retail level and 33% less inventory at the distributor level than a reference VMI model.

An integrated vendor-managed inventory model for a two-echelon system with order cost reduction

Simultaneously reducing inventory levels of raw materials, work-in-process, and finished items has become a major focus for supply chain management. In order to achieve a higher degree of coordination and automation among the supply chain parties, the supply chain sometimes invests in reducing the ordering cost to streamline and speed up transactions via the application of information technology. In this paper, an integrated vendor-managed inventory (VMI) model is presented for a single vendor and multiple buyers, where the vendor purchases, and processes raw materials and then delivers finished items to multiple buyers. A joint relevant cost model is developed with constant production and demand rates under the assumption that the buyers’ ordering cycles may be different and that each buyer can replenish more than once in one production cycle, in which the investment decision is also considered. A solution procedure of the optimal investment amount and replenishment decision for all the buyers and the vendor is proposed. Three numerical examples with an exponential ordering cost function are presented to provide insight.

Vendor managed inventory model: a case study

This paper describes with the help of a case study how vendor managed inventory (VMI) model managers in real time the dynamic needs of supply chain process. Throughout the supply chain, VMI model is a way to cut inventory related costs and keep inventory levels low. VMI model helps companies to reduce the inventory‐associated costs by shifting the responsibility of managing and replenishing inventory to vendors. A study of a leading tyre manufacturer (XYZ) is reported. The supply chain of this company includes raw materials, manufacturing operations and the distribution network. The product range includes truck tyres, front‐end tractor tyres, scooter tyres, LCV tyres, and passenger radial tyres for both domestic and international market from manufacturing plants at different locations in the country. A prototype of VMI model based on simulation approach has been developed to illustrte how VMI model can enhance the performance of this organization by minimizing the inventory associated costs.

PERFORMANCE ANALYSIS OF FORECAST DRIVEN VENDOR MANAGED INVENTORY SYSTEM

Vendor Managed Inventory (VMI) is a centralized link between suppliers and customers that enables faster, less complex transactions without creating individual lines of communication for every business relationship. The current scenario necessitates the effective integration of forecasting with VMI to maintain its efficient inventory level with less safety stock. Concerning the above, this paper proposes a Forecast Driven Vendor Managed Inventory Model (FDVMI) in which a suitable forecasting model, which has minimum error and which satisfies Tracking Signal, is selected to predict the demand. The operational control and performance parameters are estimated for the partners under VMI mode of operation. The proposed model is analyzed with a case problem of M/s Nerolac stock point, Madurai with all performance parameters. The analysis reveals that the adaptation of FDVMI guarantees tangible benefits such as increase in buyer profit, vendor profit, decrease in sales price and contract price and intangible benefits such as reduced inventory, replenishments and stock outs. However, the validity of the results depends on the various factors such as sales-demand relationship, order and carrying costs of vendor and buyer in the Existing Operation (EO), combined order and carrying costs of vendor in VMI system and so on.