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Evolutionary dynamics of two-actor VMI-driven supply chains

Author

Listed:
  • Fidel Torres

    (Universidad de los Andes)

  • César García-Díaz

    (Universidad de los Andes)

Abstract

The strategy of integration known as vendor-managed inventory (VMI), which allows the coordination of inventory policies between producers and buyers in supply chains, has long been considered a strategy for inventory cost reduction. Although the literature acknowledges the importance of understanding the dynamics of VMI implementation through evolutionary games, research in this topic still remains scarce. This paper studies the dynamics of strategic interaction of a producer–buyer supply chain under a newly developed VMI scheme, which makes use of a synchronization mechanism between the buyer and the producer replenishment cycles. By using this alternative VMI representation, we obtain the mathematical conditions that determine the degree of stability of evolutionarily stable strategies. As other evolutionary game theoretical approaches, we also find a lower bound for penalty costs that ensures a VMI contract, but most importantly, we also find how a VMI implementation might depend on the difference between production and demand rates, regardless of any penalty costs.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:comaot:v:24:y:2018:i:3:d:10.1007_s10588-017-9259-z
    DOI: 10.1007/s10588-017-9259-z
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    References listed on IDEAS

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    Cited by:

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    2. Jing Liu & Fuyou Huang & Chao Ma, 2021. "Coordination of VMI supply chain with replenishment tactic under risk aversion and sales effort," 4OR, Springer, vol. 19(3), pages 389-414, September.

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