Title: VMI modelling in global and electronic markets

Authors: Maria Chatzipanagioti, Vasiliki Theodori, Dimitrios Vlachos

Addresses: Department of Mechanical Engineering, Industrial Management Division, Aristotle University of Thessaloniki, P.O. Box 461, 54124 Thessaloniki, Greece. ' Department of Mechanical Engineering, Industrial Management Division, Aristotle University of Thessaloniki, P.O. Box 461, 54124 Thessaloniki, Greece. ' Department of Mechanical Engineering, Industrial Management Division, Aristotle University of Thessaloniki, P.O. Box 461, 54124 Thessaloniki, Greece

Abstract: Many dramatic changes have recently occurred that exacerbated the need for sophisticated and responsive approaches to supply chain management. A promising strategic opportunity is the collaboration among supply chain partners through the integration of the decision-making process across the extended enterprise. Vendor-Managed Inventory (VMI) is such a strategy, which includes a modern approach for inventory management, where the supplier takes on the responsibility of monitoring, planning and directly replenishing the inventory at the retailer|s site. This research aims first to summarise the major quantitative research efforts on VMI systems, second to briefly present the technological infrastructure required, and finally to evaluate the performance of a two-echelon supply chain (one vendor and N retailers) under a VMI logic. We present optimal policies, obtained through a discrete-event simulation model and a grid search algorithm, that maximise the supply chain|s total profit. The VMI system performance is compared to the performance of a system where the retailer manages its own inventory (RMI – Retailer Managed Inventory). Extensive numerical experimentation provides useful managerial insights.

Keywords: supply chain management; SCM; information sharing; vendor managed inventory; VMI; discrete event simulation; two-echelon supply chain; extended enterprise; supply chain collaboration; inventory management.

DOI: 10.1504/IJLSM.2007.012993

International Journal of Logistics Systems and Management, 2007 Vol.3 No.3, pp.271 - 287

Published online: 03 Apr 2007 *

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