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How much does VMI better than RMI in a global environment?

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Listed:
  • Yu, Haiyan
  • Tang, Linglang
  • Xu, Yinfeng
  • Wang, Yong

Abstract

Vendor-managed inventory (VMI) strategy can improve the performance of supply chain by deciding more appropriate order quantity, compared with retailer-managed inventory (RMI). We present an EOQ based model to study the performance of VMI in a global environment, in which the retailer faces demand uncertainty (distribution of demand is unknown yet) and the supplier faces exchange rate uncertainty. We prove the performance ratio of the long-run average costs under VMI to that under RMI in theory. Our study suggests that VMI does not perform better than RMI all the time when VMI cannot reduce the ordering/delivery/holding cost, and VMI performs worse first and better later as the degree of exchange rate fluctuation increases. But it is worth to apply VMI strategy if the ordering/delivery/holding cost can be reduced.

Suggested Citation

  • Yu, Haiyan & Tang, Linglang & Xu, Yinfeng & Wang, Yong, 2015. "How much does VMI better than RMI in a global environment?," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 268-274.
    • Handle: RePEc:eee:proeco:v:170:y:2015:i:pa:p:268-274
    DOI: 10.1016/j.ijpe.2015.10.004
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    References listed on IDEAS

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    1. Rad, Reza Hosseini & Razmi, Jafar & Sangari, Mohamad Sadegh & Ebrahimi, Zahra Fallah, 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, Elsevier, vol. 153(C), pages 295-308.
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    1. Fidel Torres & César García-Díaz, 2018. "Evolutionary dynamics of two-actor VMI-driven supply chains," Computational and Mathematical Organization Theory, Springer, vol. 24(3), pages 351-377, September.

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