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Vendor managed inventory models for single-vendor multi-retailer supply chains with quality consideration

Author

Listed:
  • Mohammed A. Darwish
  • Osama M. Odah
  • Suresh Kumar Goyal

Abstract

In this paper, efficient algorithms are devised to solve two VMI models for a single-vendor multi-retailer supply chain. The first model is for a decentralised supply chain where the vendor's expected profit is maximised. The other model, however, is for a centralised supply chain where the expected system profit is maximised. It is assumed that the lot received by vendor contains a random number of non-conforming items and, thus, inspection is performed on the incoming lot before it is delivered the retailers. In addition, we assume that non-conforming items are sold as a single batch to a secondary market at a reduced price. We also assume that the inspection process is perfect and is performed at a finite rate. In the proposed models, we incorporate a VMI contract which includes an upper limit on retailer's inventory level. In order to encourage cooperation between vendor and retailers, we propose a scheme that distributes the extra profit obtained by the integrated solution between the vendor and retailers.

Suggested Citation

  • Mohammed A. Darwish & Osama M. Odah & Suresh Kumar Goyal, 2015. "Vendor managed inventory models for single-vendor multi-retailer supply chains with quality consideration," International Journal of Industrial and Systems Engineering, Inderscience Enterprises Ltd, vol. 20(1), pages 22-57.
  • Handle: RePEc:ids:ijisen:v:20:y:2015:i:1:p:22-57
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    Cited by:

    1. Hesham K. Alfares & Ahmed M. Attia, 2017. "A supply chain model with vendor-managed inventory, consignment, and quality inspection errors," International Journal of Production Research, Taylor & Francis Journals, vol. 55(19), pages 5706-5727, October.

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