An effective integrated inventory model to coordinate inventory replenishment and shipment consolidation

Abstract

This paper proposed a quantity-based integrated model to coordinate inventory replenishment and outbound shipment consolidation for vendor-managed inventory system. An analytical model is developed to derive the optimum replenishment quantity and economic shipment quantity simultaneously. The quantity-based integrated model is a more effective integration of the different logistical activities. It results in a total cost less than that of the time-based integrated model. In the vendor-managed inventory (VMI) system we developed, a supplier can simultaneously reduce the logistical costs and provide a high customer service level. This result can help a supplier to obtain substantial benefits from the integrated model.

Evaluating vendor-managed inventory (VMI) in non-traditional environments using simulation

“…Mishra and Raghunathan (2004) created a mathematical model to analyze competition between sellers in a VMI environment and proposed that VMI increases the competition between such manufacturers and that retailers may see this competition as another benefit to using VMI. Lo and Wee (2005) proposed a mathematical model, based on Cetinkaya and Lee (2000) to assist in coordinating the shipping function in a VMI system. The quantitybased deterministic model helped to reduce transportation costs in an (s, S) system better than a time-based model.…”