Minimizing the Total Cost in an Integrated Vendor--Managed Inventory System
Journal of Heuristics
Analyzing information-enabled stockout management under vendor-managed inventory
Information Technology and Management
Journal of Management Information Systems
Asymmetric Information and Economies of Scale in Service Contracting
Manufacturing & Service Operations Management
Achieving a Long-Term Service Target with Periodic Demand Signals: A Newsvendor Framework
Manufacturing & Service Operations Management
A vendor managed inventory model under contractual storage agreement
Computers and Operations Research
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This paper models a type of vendor-managed inventory (VMI) agreement that occurs in practice called a (z, Z) contract. We investigate the savings due to better coordination of production and delivery facilitated by such an agreement. The optimal behavior of both the supplier and the retailer are characterized. The optimal replenishment and production policies for a supplier are found to be up-to policies, which are shown to be easily computed by decoupling the periods when the supplier outsources from those when the supplier does not outsource. A simple application of the newsvendor relation is used to define the retailer's optimal policy. Numerical analysis is conducted to compare the performance of a single supplier and a single retailer operating under a (z, Z) VMI contract with the performance of those operating under traditional retailer-managed inventory (RMI) with information sharing. Our results verify some observations made in industry about VMI and show that the (z, Z) type of VMI agreement performs significantly better than RMI in many settings, but can perform worse in others.