An integrated retail space allocation and lot sizing models under vendor managed inventory and consignment stock arrangements |
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Authors: | Moncer A. Hariga Abdulrahman Al-Ahmari |
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Affiliation: | Engineering Systems Management Program, College of Engineering, American University of Sharjah, P.O. Box 26666, Sharjah, United Arab Emirates;Industrial Engineering Department, College of Engineering, King Saud University, P.O. Box 800, Riyadh 11421, Saudi Arabia |
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Abstract: | In this paper, we develop integrated retail shelf space allocation and inventory models for a single item with a stock dependent demand. The integrated models are developed for a supply chain operating under vendor-managed inventory (VMI) and consignment stock (CS) agreement. More precisely, the supplier is responsible for initiating orders on behalf of the retailer and decides about the size of each order, the quantity to be displayed on the shelves, and the reorder point. In addition, the supplier owns the stock at the retailer’s premises until it is sold. We develop mathematical models to assess the benefits accrued by both parties as a result of the adoption of VMI–CS partnership. Results from the numerical experimental study show that such partnership is more attractive to all supply chain members when the retailer provides a flexible display capacity. Moreover, the supplier can use his/her selling price and the maximum allocated shelf space as negotiation means to benefit from the partnership. |
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