Skip to main content
Springer Nature Link
Log in

Multiple-vendor, multiple-retailer based vendor-managed inventory

  • Published:
Annals of Operations Research Aims and scope Submit manuscript

Abstract

Vendor-managed inventory is a coordinated system where a vendor decides about the retailer’s replenishment quantity and time. This work studies a two-echelon distribution work composed of multiple vendors and retailers in traditional and vendor-managed inventory systems where unsatisfied demands are lost sales. We also consider that the retailers’ demand is stochastic following a uniform distribution. The mathematical models are developed and applied in vendor-managed inventory and traditional systems. Under the traditional supply chain, the vendor incurs the cost of holding and production setup, while a retailer incurs expenses for inventory holding, ordering, transportation and lost sales. In a vendor-managed inventory system, as the vendor is responsible for his retailers, the retailer’s costs are transferred to the vendor. We aim to identify benefits of vendor-managed inventory. The total cost per unit time is used as a comparable measure between vendor-managed inventory and traditional systems. Numerical examples and a sensitivity analysis of key parameters include the vendor’s setup cost and holding cost; the retailer’s transportation and ordering costs are presented in both vendor-managed inventory and traditional systems. The results illustrate that vendor-managed inventory total system inventory cost is lower than a traditional system where shortage is allowed.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Subscribe and save

Springer+ Basic
€32.70 /Month
  • Get 10 units per month
  • Download Article/Chapter or eBook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price includes VAT (France)

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Fig. 7

Similar content being viewed by others

References

  • Angulo, A., Nachtmann, H., & Waller, M. A. (2004). Supply chain information sharing in a vendor managed inventory partnership. Journal of Business Logistics, 25(1), 101–20.

    Article  Google Scholar 

  • Ata, A. T., Seyed, T. A. N., Nima, S., Ramak, G. M., & Armin, J. (2010). A particle swarm optimization approach for constraint joint single buyer-single vendor inventory problem with changeable lead time and (r, Q) policy in supply chain. International Journal of Advanced Manufacture Technology, 51, 1209–1223.

  • Babak, G.-J., Bruce, C.-S., & Rasoul, H. (2004). A multi-product continuous review inventory system with stochastic demand, backorders, and a budget constraint. European Journal of Operational Research, 158, 456–469.

    Article  Google Scholar 

  • Ben-Daya, M., & Hariga, M. (2004). Integrated single vendor single buyer model with stochastic demand and variable lead time. International Journal of Production Economics, 92, 75–80.

    Article  Google Scholar 

  • Borade, A. B., Kannan, G., & Bansod, S. V. (2013). Analytical hierarchy process-based framework for VMI adoption. International Journal of Production Research, 51(4), 963–978.

    Article  Google Scholar 

  • Cachon, G., & Fisher, M. (2000). Supply chain inventory management and the value of shared information. Management Science, 46, 1032–1048.

    Article  Google Scholar 

  • Diabat, A. (2014). Hybrid algorithm for a vendor managed inventory system in a two-echelon supply chain. European Journal of Operational Research, 238(1), 114–121.

    Article  Google Scholar 

  • Diabat, A., Abdallah, T., & Henschel, A. (2015). A closed-loop location-inventory problem with spare parts consideration. Computers & Operations Research, 54, 245–256.

    Article  Google Scholar 

  • Diabat, A., Abdallah, T. & Le, T. (2014). A hybrid tabu search based heuristic for the periodic distribution inventory problem with perishable goods. Annals of Operations Research. doi:10.1007/s10479-014-1640-4.

  • Diabat, A., & Al-Salem, M. (2015). An integrated supply chain problem with environmental considerations. International Journal of Production Economics, 164, 330–338.

    Article  Google Scholar 

  • Diabat, A., Aouam, T., & Ozsen, L. (2009). An evolutionary programming approach for solving the capacitated facility location problem with risk pooling. International Journal of Applied Decision Sciences, 2(4), 389–405.

    Article  Google Scholar 

  • Diabat, A., Battaïa, O., & Nazzal, D. (2015). An improved Lagrangian relaxation-based heuristic for a joint location-inventory problem. Computers & Operations Research, 61, 170–178.

    Article  Google Scholar 

  • Diabat, A., & Richard, J. P. P. (2015). An integrated supply chain problem: A nested lagrangian relaxation approach. Annals of Operations Research, 229(1), 303–323.

    Article  Google Scholar 

  • Diabat, A., & Theodorou, E. (2015). A location-inventory supply chain problem: Reformulation and piecewise linearization. Computers & Industrial Engineering. doi:10.1016/j.cie.2015.05.021.

  • Darwish, M. A., & Odah, O. M. (2010). Vendor managed inventory model for single-vendor multi-retailer supply chains. European Journal of Operational Research, 201, 473–484.

    Article  Google Scholar 

  • Fox, M. L. (1996). Integrating vendor-managed inventory into supply chain decision-making. In APICS 39th international conference proceedings, New Orleans, pp. 126–128.

  • Govindan, K. (2013). Vendor-managed inventory: A review based on dimensions. International Journal of Production Research, 51(13), 3808–3835.

    Article  Google Scholar 

  • Govindan, K. (2015). The optimal replenishment policy for time-varying stochastic demand under vendor managed inventory. European Journal of Operational Research, 242(2), 402–423.

    Article  Google Scholar 

  • Govindan, K., & Fattahi, M. (2015) Investigating risk and robustness measures for supply chain network design under demand uncertainty: A case study of glass supply chain. International Journal of Production Economics. doi:10.1016/j.ijpe.2015.09.033.

  • Hu, W., Li, Y., & Govindan, K. (2014). The impact of consumer returns policies on consignment contracts with inventory control. European Journal of Operational Research, 233(2), 398–407.

    Article  Google Scholar 

  • Jarfar, R., Reza, H. R., & Mohamed, S. S. (2010). Developing a two-echelon on mathematical model for a vendor-managed inventory (VMI) system. International Journal of Advanced Manufacture Technology, 48, 773–783.

    Article  Google Scholar 

  • Javad, S., Seyed, M. M., Seyed, T. A. N., & Saeid, S. (2013). Optimizing a multi-vendor multi-retailer vendor managed inventory problem: Two tuned meta-heuristic algorithms. Knowledge-Based Systems, 50, 159–170.

    Article  Google Scholar 

  • Jun-Yeon, L., & Richard, K. C. (2014). Contracting for vendor-managed inventory with consignment stock and stockout-cost sharing. International Journal of Production Economics, 51, 158–173.

    Google Scholar 

  • Kannan, G., Grigore, M. C., Devika, K., & Senthilkumar, A. (2013). An analysis of the general benefits of a centralised VMI system based on the EOQ model. International Journal of Production Research, 51(1), 172–188.

    Article  Google Scholar 

  • Le, T., Diabat, A., Richard, J.-P., & Yih, Y. (2013). A column generation-based heuristic algorithm for an inventory routing problem with perishable goods. Optimization Letters, 7(7), 1481–1502.

    Article  Google Scholar 

  • Mahesh, N., & Sampath, R. (2008). Contracting under vendor managed inventory systems using holding cost subsidies. Production and Operations Management, 17, 200–210.

    Article  Google Scholar 

  • Rad, R. H., Razmi, J., Sangari, M. S., & Ebrahimi, Z. F. (2014). Optimizing an integrated vendor-managed inventory system for a single-vendor two-buyer supply chain with determining weighting factor for vendor’s ordering cost. International Journal of Production Economics, 153, 295–308.

    Article  Google Scholar 

  • Seyed, H. R. P., Seyed, T. A. N., & Ali, R. N. (2010). An investigation of vendor-managed inventory application in supply chain: The EOQ model with shortage. International Journal of Advanced Manufacture Technology, 49, 329–339.

    Article  Google Scholar 

  • Shen, L., Govindan, K., Borade, A. B., Diabat, A., & Kannan, D. (2013). An evaluation of vendor managed inventory practices from small and medium indian enterprises. Journal of Business Economics and Management, 14, S76–S95.

    Article  Google Scholar 

  • Silver, E. F., Dyke, D. F., & Peterson, R. (1998). Inventory management and production planning and scheduling (3rd ed.). New York: Wiley.

    Google Scholar 

  • Waller, M., Johnson, M. E., & Davis, T. (1999). Vendor-managed inventory in the retail supply chain. Journal of Business Logistics, 20(1), 183–203.

    Google Scholar 

  • Yan, D., & Kefeng, X. (2002). A supply chain model of vendor managed inventory. Transportation Research Part E, 38, 75–95.

    Article  Google Scholar 

  • Yao, Y. L., Evers, P. T., & Dresner, M. E. (2007). Supply chain integration in vendor managed inventory. Decision Support System, 43, 663–674.

    Article  Google Scholar 

  • Yuliang, Y., Yan, D., & Martin, D. (2010). Managing supply chain backorders under vendor managed inventory: An incentive approach and empirical analysis. European Journal of Operational Research, 203, 350–359.

    Article  Google Scholar 

Download references

Acknowledgments

This research was supported in part by National Natural Science Foundation of China (Grant No. 71302005), the major Program of the National Social Science Fund of China (Grant No. 13&ZD147), and Fundamental Research Funds for the Central Universities (Grant No. 2662014BQ048), and Research Project of Department of Education of Hubei Province (Grant No. Q20141803).

Author information

Authors and Affiliations

  1. College of Economics and Management, Huazhong Agricultural University, Wuhan, 430070, People’s Republic of China

    Xianpei Hong

  2. Department of Technology and Innovation, University of Southern Denmark, Odense, Denmark

    Wang Chunyuan

  3. School of Management, Tianjin University of Technology, Tianjin, 300384, People’s Republic of China

    Lei Xu

  4. Department of Engineering Systems and Management, Masdar Institute of Science and Technology, Abu Dhabi, United Arab Emirates

    Ali Diabat

Authors
  1. Xianpei Hong
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Wang Chunyuan
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Lei Xu
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Ali Diabat
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Lei Xu.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Hong, X., Chunyuan, W., Xu, L. et al. Multiple-vendor, multiple-retailer based vendor-managed inventory. Ann Oper Res 238, 277–297 (2016). https://doi.org/10.1007/s10479-015-2040-0

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10479-015-2040-0

Keywords

Search

Navigation