Consignment and vendor managed inventory in single-vendor multiple buyers supply chains |
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Authors: | Mohamed Ben-Daya Moncer Hariga Mohammad M AlDurgam |
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Affiliation: | 1. Systems Engineering Department , King Fahd University of Petroleum and Minerals , Dhahran , Saudi Arabia;2. College of Engineering , American University of Sharjah , Sharjah , United Arab Emirates |
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Abstract: | In this paper we model a consignment (CS) and vendor-managed inventory (VMI) policy for a single vendor and multiple buyers supply chain with known demand. We study three vendor–buyers partnerships: (i) the vendor and the buyers act independently, (ii) the vendor enters in a vendor-managed inventory consignment (VMI&CS) partnership with the buyers and (iii) the vendor and the buyer belong to a vertically integrated firm where a single decision maker decides about the ordering policies. We use relationships (i) and (ii) to study the benefits of the VMI&CS agreement. We provide analytical and numerical results. We find that such an agreement is more beneficial when the vendor has a flexible capacity. It is also more attractive to buyers when they have significant order costs and the vendor's setup cost is not large. Finally we find that under VMI&CS the vendor will tend to make more frequent shipments with smaller lots. |
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Keywords: | inventory management consignment vendor managed inventory supply chain |
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