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Vendor-managed inventory and the effect of channel power

In: Supply Chain Planning

Author

Listed:
  • Bogdan C. Bichescu

    (The University of Tennessee)

  • Michael J. Fry

    (University of Cincinnati)

Abstract

AbstractWe analyze decentralized supply chains that follow general continuous review (Q, R) inventory policies subject to vendor-managed inventory agreements where the supplier chooses the order quantity Q, and the retailer chooses the reorder point R. Within the VMI scenario, we explore the effect of divisions of channel power on supply chain and individual agent performance by examining different game theoretic models. Optimal policies and analytical results, including existence and uniqueness proofs for equilibrium solutions under VMI, are derived. Numerical results are provided to compare the effectiveness of VMI and to analyze different channel power relationships under a variety of environmental conditions. We find that VMI can result in considerable supply chain savings over traditional relationships and that the relative division of channel power can significantly effect the performance of VMI. Interestingly, we find that the greatest system benefits from VMI arise in asymmetric channel power relationships, but that individual agents lack the incentive to assume a leadership role.

Suggested Citation

  • Bogdan C. Bichescu & Michael J. Fry, 2009. "Vendor-managed inventory and the effect of channel power," Springer Books, in: Herbert Meyr & Hans-Otto Günther (ed.), Supply Chain Planning, pages 247-280, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-93775-3_10
    DOI: 10.1007/978-3-540-93775-3_10
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    Citations

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    Cited by:

    1. Lee, Jun-Yeon & Cho, Richard K. & Paik, Seung-Kuk, 2016. "Supply chain coordination in vendor-managed inventory systems with stockout-cost sharing under limited storage capacity," European Journal of Operational Research, Elsevier, vol. 248(1), pages 95-106.
    2. Xue, Weili & Caliskan Demirag, Ozgun & Niu, Baozhuang, 2014. "Supply chain performance and consumer surplus under alternative structures of channel dominance," European Journal of Operational Research, Elsevier, vol. 239(1), pages 130-145.
    3. Abhilasha Prakash Katariya & Sıla Çetinkaya & Eylem Tekin, 2014. "Cyclic Consumption and Replenishment Decisions for Vendor-Managed Inventory of Multisourced Parts in Dell’s Supply Chain," Interfaces, INFORMS, vol. 44(3), pages 300-316, June.
    4. Gao, Yongling & Driouchi, Tarik & Bennett, David J., 2018. "Ambiguity aversion in buyer-seller relationships: A contingent-claims and social network explanation," International Journal of Production Economics, Elsevier, vol. 200(C), pages 50-67.
    5. Yu, Yugang & Hong, Zhaofu & Zhang, Linda L. & Liang, Liang & Chu, Chengbin, 2013. "Optimal selection of retailers for a manufacturing vendor in a vendor managed inventory system," European Journal of Operational Research, Elsevier, vol. 225(2), pages 273-284.
    6. Phan, Dinh Anh & Vo, Thi Le Hoa & Lai, Anh Ngoc & Nguyen, Thi Lan Anh, 2019. "Coordinating contracts for VMI systems under manufacturer-CSR and retailer-marketing efforts," International Journal of Production Economics, Elsevier, vol. 211(C), pages 98-118.
    7. Benoit Duvocelle & János Flesch & Hui Min Shi & Dries Vermeulen, 2021. "Search for a moving target in a competitive environment," International Journal of Game Theory, Springer;Game Theory Society, vol. 50(2), pages 547-557, June.
    8. Ghasemi, Elaheh & Lehoux, Nadia & Rönnqvist, Mikael, 2024. "A multi-level production-inventory-distribution system under mixed make to stock, make to order, and vendor managed inventory strategies: An application in the pulp and paper industry," International Journal of Production Economics, Elsevier, vol. 271(C).
    9. Weißhuhn, Sandria & Hoberg, Kai, 2021. "Designing smart replenishment systems: Internet-of-Things technology for vendor-managed inventory at end consumers," European Journal of Operational Research, Elsevier, vol. 295(3), pages 949-964.
    10. Lee, Jun-Yeon & Cho, Richard K., 2014. "Contracting for vendor-managed inventory with consignment stock and stockout-cost sharing," International Journal of Production Economics, Elsevier, vol. 151(C), pages 158-173.
    11. Almehdawe, Eman & Mantin, Benny, 2010. "Vendor managed inventory with a capacitated manufacturer and multiple retailers: Retailer versus manufacturer leadership," International Journal of Production Economics, Elsevier, vol. 128(1), pages 292-302, November.

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