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One vendor-one retailer in vendor managed inventory problem with stochastic demand

Author

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  • Cahyono Sigit Pramudyo
  • Huynh Trung Luong

Abstract

One of the basic problems in supply chain operation is lack of information exchanges related to inventory between vendor and retailer. Vendor managed inventory (VMI) provides a good approach to handle this problem. VMI has been proven to reduce cost and improve customer service level. This research aim is to develop a VMI model for the system with one vendor and one retailer to minimise the total system cost. The model is developed for (t, q) policy where the retailer's cycle time is fixed. Due to the complexity nature of the model, simulation-optimisation using genetic algorithm is employed to determine the decision variables which are the retailer's lot size, the vendor's lot size, and the number of replenishments in a vendor cycle. Numerical experiments are conducted to show how the proposed model works. Sensitivity analysis is also conducted to understand the effects of some input parameters.

Suggested Citation

  • Cahyono Sigit Pramudyo & Huynh Trung Luong, 2017. "One vendor-one retailer in vendor managed inventory problem with stochastic demand," International Journal of Industrial and Systems Engineering, Inderscience Enterprises Ltd, vol. 27(1), pages 90-106.
    • Handle: RePEc:ids:ijisen:v:27:y:2017:i:1:p:90-106
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