Journal of Korean Institute of Industrial Engineers (대한산업공학회지)

Korean Institute of Industrial Engineers (대한산업공학회)
권호 표지

A Comparison Study on Retailer-managed and Vendor-managed Inventory Policies in the Retail Supply Chain

소매점 공급사슬에서 소매점주도와 공급자주도 재고정책에 대한 비교 연구

  • Hong, Sung-Chul (Department of Industrial Engineering, College of Advanced Technology, Kyung Hee University) ;
  • Park, Yang-Byung (Department of Industrial Engineering, College of Advanced Technology, Kyung Hee University)
  • 홍성철 (경희대학교 테크노공학대학 산업공학과) ;
  • 박양병 (경희대학교 테크노공학대학 산업공학과)
  • Published : 2006.12.31
Download PDF
⟨ Previous Next ⟩

Abstract

Vendor-managed inventory policy(VMIP) is a supply-chain initiative where the supplier is authorized to manage inventories of items at retail locations. In VMIP, the supplier monitors sales and stock information at retail locations and makes decisions of inventory replenishment and transportation simultaneously. VMIP has been known as an effective supply chain strategy that can realize many of benefits obtainable only in a fully integrated supply chain. However, VMIP does not always lead to lower the supply chain cost. It sometimes generates the total supply chain cost higher than the traditional retailer-managed inventory policy (RMIP). In this paper, we perform a comparison study on RMIP and VMIP in the retail supply chain which consists of a single supplier and a number of retailers. We formulate mixed integer programming models for both RMIP and VMIP with vehicle routing problems and perform computational experiments on various test problems. Furthermore, we derive the conditions which guarantee the dominant position for VMIP with respect to total supply chain cost in the simple retail supply chain.

Keywords

References

  1. Bertazzi, L., Paletta, G., and Speranza, M. G. (2002), Deterministic Order-up-to Level Policies in an Inventory Routing Problem, Transportation Science, 36(1), 119-132 https://doi.org/10.1287/trsc.36.1.119.573
  2. Bertazzi, L., Paletta, G., and Speranza, M. G. (2005), Minimizing the Total Cost in an Integrated Vendor-managed Inventory System, Journal of Heuristics, 11(5-6), 393-419 https://doi.org/10.1007/s10732-005-0616-6
  3. Carter, M. W., Farvolden, J. M., Laporte, G., and Xu, J. (1996), Solving and Integrated Logistics Problem Arising in Grocery Distribution, INFOR, 34(4), 290-306
  4. Cetinkaya, S. and Lee, C-Y. (2000), Stock Replenishment and Shipment Scheduling for Vendor-managed Inventory Systems, Management Science, 46(2), 217-233 https://doi.org/10.1287/mnsc.46.2.217.11923
  5. Chen, F. Y., Wang, T., and Xu, T. Z. (2005), Integrated Inventory Replenishment and Temporal Shipment Consolidation : a Comparison of Quantity-based and Time-based Models, Annals of Operations Research, 135(1), 197-210 https://doi.org/10.1007/s10479-005-6241-9
  6. Disney, S. M. and Towill, D. R. (2003), The Effect of Vendor-managed Inventory(VMI) Dynamics on the Bull-whip Effect in Supply Chains, International Journal of Production Economics, 85(2), 199-215 https://doi.org/10.1016/S0925-5273(03)00110-5
  7. Disney, S. M., Potter, A. T., and Gardner, B. M. (2003), The Impact of Vendor-managed Inventory on Transport Operations, Transportation Research Part E: Logistics and Transportation Review, 39(5), 363-380 https://doi.org/10.1016/S1366-5545(03)00014-0
  8. Dong, Y. and Xu, K. (2002), A Supply Chain Model of Vendor- managed Inventory, Transportation Research Part E : Logistics and Transportation Review, 38(2), 75-95 https://doi.org/10.1016/S1366-5545(01)00014-X
  9. Herer, Y. T. and Levy, R. (1997), The Metered Inventory Routing Problem, an Integrative Heuristic Algorithm, International Journal of Production Economics, 51, 69-81 https://doi.org/10.1016/S0925-5273(97)00059-5
  10. ILOG CPLEX 9.1 (2005), User's Manual, ILOG S. A., France
  11. Jeong, J-W. and Choi, I-C. (2004), The Optimal Order Quantities in the Vendor-managed Inventory System with the nQ Ordering Policy, Journal of the Korean Society of Supply Chain Management, 4(1), 23-30
  12. Malandraki C. and Daskin M. (1992), Time Dependent Vehicle Routing Problems: Formulations, Properties and Heuristic Algorithms, Transportation Science, 26(3), 185-199 https://doi.org/10.1287/trsc.26.3.185
  13. Minitab (2003), Meet MINITAB Release 14 for Windows, Minitab, Inc., USA
  14. Rusdiansyah, A. and Tsao, D-B. (2005), An Integrated Model of the Periodic Delivery Problems for Vending Machine Supply Chains, Journal of Food Engineering, 70(3), 421-434 https://doi.org/10.1016/j.jfoodeng.2004.05.073
  15. Sim, E-Y. (2005), Operational Factors for Effective VMI System, e-Logistics, 48
  16. Waller, M., Johnson, M. E., and Davis, T. (1999), Vendor-managed Inventory in the Retail Supply Chain, Journal of Business Logistics, 20(10), 183-203