Vendor Managed Inventory Program Research Articles

The Influence of Supply Chain Financing on Enterprise Operation Efficiency and Competitiveness

Supply chain financing has become a vital tool for businesses to enhance their operational efficiency and competitiveness in today's dynamic market environment. This research aims to explore the impact of supply chain financing on business efficiency and competitiveness. The study examines how supply chain financing can improve cash flow management, optimize inventory management, and foster collaboration among supply chain partners. By providing timely access to working capital, supply chain financing helps businesses optimize their cash flow, reduce receivables collection time, and minimize the need for costly short-term borrowing. This enhances financial stability and enables companies to meet their financial obligations promptly. Furthermore, supply chain financing offers flexible financing options, such as inventory financing and vendor-managed inventory programs, which enable companies to optimize inventory levels, reduce stockouts, and lower holding costs. This allows businesses to respond quickly to market demands, reduce lead times, and improve overall supply chain efficiency.In addition, supply chain financing platforms facilitate the sharing of financial information and streamline payment processes, enhancing transparency and trust among supply chain partners. This fosters better coordination of production and delivery schedules, reduces supply chain disruptions, and enhances the overall reliability and efficiency of the supply chain.The research methodology includes a comprehensive review of existing literature, case studies, and interviews with industry experts to gather empirical evidence on the impact of supply chain financing on business efficiency and competitiveness. The findings of this research will contribute to a better understanding of the benefits and challenges of supply chain financing and provide insights for businesses seeking to enhance their operational efficiency and competitiveness. Overall, the research highlights the significant role of supply chain financing in improving business efficiency and competitiveness. By leveraging supply chain financing, companies can optimize cash flow, streamline inventory management, and foster collaboration among supply chain partners. This, in turn, enables businesses to respond effectively to market dynamics, gain a competitive edge, and achieve sustainable growth in today's rapidly changing business landscape.

Decision analysis of individual supplier in a vendor-managed inventory program with revenue-sharing contract

As a useful strategy to improve the flexibility of the system to manage uncertainty in supply and demand and to improve the sustainability of the supply chain, vendor-managed inventory (VMI) programs have attracted widespread attention in the field of supply chain management. However, a growing body of empirical literature has shown that participants’ decisions deviate significantly from the standard theoretical predictions. Under a VMI program, the supplier bears not only the production cost, but also the risk of leftover inventory. Moreover, the inequality among participants and different personalities of decision-makers in VMI programs may lead to the divergence of decision-making. To understand the supplier’s replenishment decision in view of the behavioral pattern, we propose a new inventory model for the supplier with the focus theory of choice. The proposed model conceives that the retailer evaluates each replenishment quantity based on the most salient demand for him/her instead of calculating the expected utility. By employing this inventory model, we construct a two-tier supply chain model with revenue-sharing contract and theoretically derive the optimal sharing percentage of the revenue and replenishment quantity. Results analysis gains managerial insights into the strategic selection of the retailer who faces suppliers with different personalities. Comparisons between the classic revenue-sharing contract model and the proposed model are also carried out by illustrative examples. This research provides a new perspective to analyze individual supplier’s behavior in a VMI program with revenue-sharing contracts.

Behaviors and Performance Improvement in a Vendor‐Managed Inventory Program: An Experimental Study

Although vendor‐managed inventory (VMI) programs have gained popularity in practice, some empirical studies report that their implementations have not been successful. We conduct experiments to investigate behaviors in a supply chain where a supplier replenishes inventories for a retailer according to a VMI program under a revenue‐sharing contract. The results show that subjects’ decisions deviate significantly from the standard theoretical predictions because the retailer presents equality preference with adjustment, and the supplier exhibits fairness concern. Since the supplier bears not only the production cost, but also the risk of leftover inventory in the VMI program, we propose an approach that provides the retailer with an opportunity to voluntarily compensate the supplier with an additional percentage of revenue after demand realization. Experimental results based on this new operational procedure show that the retailer still presents equality preference with adjustment, but the supplier has a decision bias of ex post inventory error regret. The supply chain can perform better under the proposed approach than under only a revenue‐sharing contract. Interestingly, the proposed approach does not cause the retailer to share a higher percentage of revenue with the supplier, but it induces the supplier to replenish a higher stock quantity, which leads to higher profits for both the retailer and the supplier.

Introducing the Time Value of Money in a Non-consignment Vendor Managed Inventory Model

Vendor managed inventory (VMI) is an integrated approach for buyer–vendor coordination, according to which the vendor (supplier or manufacturer) decides on the appropriate buyer’s (retailer’s) inventory levels. The time value of money has not traditionally been considered in evaluating VMI supply chain’s total inventory cost in any studies up to now. Therefore, in the present study a new model for two-echelon single-manufacturer multi-retailer supply chain under non-consignment VMI program by considering time value of money is proposed. In order to take the time value of money into consideration, the present value of each inventory cost is evaluated in a single period and generalized to infinity horizon and then is transformed to the equivalent annual cost. This model also explicitly includes contractual agreements between the manufacturer and each retailer. Under this type of contracts, an upper bound on each retailer’s inventory level is placed such that the manufacturer is penalized for items exceeding this bound. At the end, a sensitivity analysis is conducted to study effects of key parameters on the optimal solution and validate the proposed model.

Inventory Management Practices and Its Effects on Vendor Managed Inventory Performance

The Vendor Managed Inventory (VMI) has long been implemented by many corporations due to its various positive effects it has towards the company’s performance.At the same time, a number of success stories of VMI program have also been discussed by numerous authors.However, until now, there is no concrete conclusion on VMI has been clarified. Therefore, this study tries to shed the lights on the effects of inventory management practices, which include visibility of demand, replenishment decision, inventory ownership, inventory location, and inventory control limits on VMI performance.Quantitative methodology was chosen as the method to gather the data where those manufacturing companies being selected according to the list from the Federation of Malaysian Manufacturer (FMM).The data was gathered from 101 manufacturing companies whose manufacturing based located in Malaysia. Data analysis was conducted by employing descriptive analysis, factor analysis, reliability analysis, and a simple multiple regressions.The findings showed that visibility of demand and inventory control limits were the main predictor of service performance. Meanwhile, only inventory location contributes to cost performance of VMI. Manufacturing companies should urge their customer to share demand information and setting appropriate min–max limits of inventory levels in order to get benefits from VMI program.It was suggested for companies to consider to setup inventory storage or warehouse near to their customer’s premises especially when engaging with abroad customers.

Economic Lot Size Formula Under VMI Program with Poisson Demand

Nowadays, inventory management plays a crucial role in manufacturing supply chains. Vendor-managed inventory (VMI) program is a collaborative initiative that shows considerable performances in managing inventories through the supply system. In this study, we discuss the VMI initiative in a serial manufacturing supply chain when there is an uncertainty in demand and provide an approximate closed-form formula for the economic lot size. In this paper, we consider a two-echelon supply chain system consisting of a manufacturer and a retailer. Under vendor-managed inventory program with centralized decision making, the manufacturer is authorized to manage inventories of all agreed upon stock keeping units at the retailer’s location. We develop a renewal reward model for the case of Poisson demand and drive the mathematical formula of the long-run average total inventory cost of supply system under VMI program, and then, we develop a closed-form approximate for the optimal solution. Finally, a numerical experiment is run and measured to evaluate the performance of our approximation.

Construct the stable vendor managed inventory partnership through a profit-sharing approach

In real life, the vendor managed inventory (VMI) model is not always a stable supply chain partnership. This paper proposes a cooperative game based profit-sharing method to stabilize the VMI partnership. Specifically, in a B2C setting, we consider a VMI program including a manufacturer and multiple online retailers. The manufacturer provides the finished product at the equal wholesale price to multiple online retailers. The online retailers face the same customer demand information. We offer the model to compute the increased profits generated by information sharing for total possible VMI coalitions. Using the solution concept of Shapley value, the profit-sharing scheme is produced to fairly divide the total increased profits among the VMI members. We find that under a fair allocation scheme, the higher inventory cost of one VMI member increases the surplus of the other members. Furthermore, the manufacturer is glad to increase the size of VMI coalition, whereas, the retailers are delighted to limit the size of the alliance. Finally, the manufacturer can select the appropriate retailer to boost its surplus, which has no effect on the surplus of the other retailers. The numerical examples indicate that the grand coalition is stable under the proposed allocation scheme.

On contracts for VMI program with continuous review ( r, Q) policy

Based on continuous review ( r, Q) policy, this paper deals with contracts for vendor managed inventory (VMI) program in a system comprising a single vendor and a single retailer. Two business scenarios that are popular in VMI program are “vendor with ownership” and “retailer with ownership”. Taking the system performance in centralized control as benchmark, we define a contract “perfect” if the contract can enable the system to be coordinated and can guarantee the program to be trusted. A revenue sharing contract is designed for vendor with ownership, and a franchising contract is designed for retailer with ownership. Without consideration of order policy and related costs at the vendor site, it is shown that one contract can perform satisfactorily and the other one is a perfect contract. With consideration of order policy and related costs at the vendor site, it is shown that one contract can perform satisfactorily and the performance of the other one depends on system parameters.

Exploring the benefits of vendor managed inventory

PurposeThe purpose of this paper is to explore the performance increase achieved by vendor managed inventory (VMI) under different levels of outside supply capacity, demand uncertainty, and lead time.Design/methodology/approachThe study uses discrete event simulation to explore the performance increase achieved by VMI under different supply chain scenarios.FindingsThe analysis suggests that when implementing a VMI program, the capacity restrictions of suppliers have to be taken into consideration even though they have not participated in the program. Furthermore, the results also show that unless the retailer provides additional information to the distributor to resolve the uncertainty, higher levels of uncertainty in market demand create significant reductions in the savings realized by VMI. Finally, this study proves that, regardless of lead time horizons, VMI provides nearly the same level of performance increase as long as the ratio of the retailer's lead time to that of the supplier's remains constant.Practical implicationsThis analysis provides a means for practitioners to understand the impact of various environmental and operational factors on the performance increase achieved by VMI so they can better analyze their specific business conditions to prepare their organizations for more successful VMI programs.Originality/valueAlthough there is a range of research focusing on VMI, only a few of those have tried to identify the factors that play an important role in the failure of VMI programs. While extending the current literature, this is the first study to explore the impact of outside supply capacity on the performance improvements achieved by VMI.