Title: A note concerning physical space occupation costs in vendor managed inventory with consignment agreement models

Authors: Marcello Braglia; Davide Castellano; Marco Frosolini

Addresses: Dipartimento di Ingegneria Civile e Industriale, Università di Pisa, via Bonanno Pisano 25/B, 56126 Pisa, Italy ' Dipartimento di Ingegneria Civile e Industriale, Università di Pisa, via Bonanno Pisano 25/B, 56126 Pisa, Italy ' Dipartimento di Ingegneria Civile e Industriale, Università di Pisa, via Bonanno Pisano 25/B, 56126 Pisa, Italy

Abstract: A new analytic formulation of the vendor managed inventory with consignment agreement is proposed. It represents a modified and more realistic version of the model proposed in Braglia and Zavanella (2003). The evaluation of the stockholding related costs is herewith substantially revisited to consider the requirements of a standard VMI relationship with consignment agreement. In particular, the physical space occupation cost held by the buyer is introduced as a component of the overall holding cost and is referred to the maximum stock level, rather than to the average value, as proposed in the past literature. Finally, an implicit analytical solution is given and compared to the original one obtained by Braglia and Zavanella (2003).

Keywords: consignment stock; joint economic lot size; JELS; vendor managed inventory; VMI; inventory holding costs; consignment agreements; space occupation costs; stockholding costs; stock levels; physical space occupation.

DOI: 10.1504/IJLSM.2014.064656

International Journal of Logistics Systems and Management, 2014 Vol.19 No.2, pp.151 - 162

Received: 21 May 2013
Accepted: 11 Jul 2013
Published online: 13 Sep 2014 *

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