Title: Vendor-managed inventory: a literature review on theoretical and empirical studies and future research directions

Authors: Jun-Yeon Lee; Seung-Kuk Paik; Richard K. Cho

Addresses: Department of Systems and Operations Management, David Nazarian College of Business and Economics, California State University, Northridge, 18111 Nordhoff St., Northridge, CA 91330-8378, USA ' Department of Systems and Operations Management, David Nazarian College of Business and Economics, California State University, Northridge, 18111 Nordhoff St., Northridge, CA 91330-8378, USA ' Faculty of Business, University of New Brunswick, Saint John, New Brunswick, Canada

Abstract: Vendor-managed inventory (VMI) is a business practice in which the supplier manages the inventory at the customer's premises and makes replenishment decisions. VMI has been extensively studied over a short period of time since it was successfully implemented in the industry in the late 1980s. In this paper, we classify and review theoretical and empirical studies on VMI. In particular, we provide three classifications of theoretical papers focusing on the contractual agreement between supply chain partners, drivers of the benefits of VMI, and research approaches, while we classify empirical papers based on their research purposes and methodologies. One of our findings is that most theoretical studies examine event-based VMI contracts such as (z, Z)-type contracts, while the penalties/rewards are based on long-term performance in many VMI agreements observed in practice. We also find that most theoretical studies focus on cost reductions from VMI and their drivers, while empirical studies report various benefits of VMI such as lower inventory and fewer stockouts. We suggest several future research directions based on our literature review.

Keywords: vendor-managed inventory; VMI; literature review; theoretical studies; empirical studies; supply chain management; SCM; cost reduction; lower inventory; stockouts.

DOI: 10.1504/IJAOM.2015.074209

International Journal of Advanced Operations Management, 2015 Vol.7 No.3, pp.199 - 228

Received: 09 Apr 2015
Accepted: 26 Oct 2015
Published online: 18 Jan 2016 *

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