Benefits of retailer-supplier partnership initiatives under time-varying demand:a comparative analytical study

This paper aims to help supply chain managers to determine the value of retailer-supplier partnership initiatives beyond information sharing (IS) according to their specific business environment under time-varying demand conditions. For this purpose, we use integer linear programming models to quantify the benefits that can be accrued by a retailer, a supplier and system as a whole from shift in inventory ownership and shift in decision-making power with that of IS. The results of a detailed numerical study pertaining to static time horizon reveal that the shift in inventory ownership provides system-wide cost benefits in specific settings. Particularly, when it induces the retailer to order larger quantities and the supplier also prefers such orders due to significantly high setup and shipment costs. We observe that the relative benefits of shift in decision-making power are always higher than the shift in inventory ownership under all the conditions. The value of the shift in decision-making power is greater than IS particularly when the variability of underlying demand is low and time-dependent variation in production cost is high. However, when the shipment cost is negligible and order issuing efficiency of the supplier is low, the cost benefits of shift in decision-making power beyond IS are not significant

One vendor-one retailer in vendor managed inventory problem with stochastic demand

One of the basic problems in supply chain operation is lack of information exchanges related to inventory between vendor and retailer. Vendor managed inventory (VMI) provides a good approach to handle this problem. VMI has been proven to reduce cost and improve customer service level. This research aim is to develop a VMI model for the system with one vendor and one retailer to minimise the total system cost. The model is developed for (t, q) policy where the retailer’s cycle time is fixed. Due to the complexity nature of the model, simulation-optimisation using genetic algorithm is employed to determine the decision variables which are the retailer’s lot size, the vendor’s lot size, and the number of replenishments in a vendor cycle. Numerical experiments are conducted to show how the proposed model works. Sensitivity analysis is also conducted to understand the effects of some input parameters

One vendor and multiple retailers system in vendor managed inventory problem with stochastic demand

In many supply networks, the retailers are reluctant to share information about demand and inventory level to the vendor. This might lead to many difficulties for the vendor in establishing his own order/production plan. Vendor managed inventory (VMI) policy can help to solve that problem. By applying VMI, information sharing is not really a problem for the vendor anymore and this policy have been proven to help reduce total inventory cost as well as improve customer service level in the supply network. In this research, a VMI model for the system with one vendor and multiple retailers will be developed. The main target of the model is to determine the retailer’s lot size, the vendor’s lot size, the retailer cycle time, and the number of replenishments in a vendor cycle so as to minimise the total system cost. For solution purpose, simulation-optimisation technique using genetic algorithm is employed to help find optimal solutions for the decision variables. Numerical experiments are conducted to show the applicability of the proposed model. Sensitivity analysis is also conducted to examine the effects of some input parameters on the optimal solution

Vendor-Buyer Coordination in Supply Chains

Collaboration between firms in order to coordinate supply chain operations can lead to both strategic and operational benefits. Many advanced forms of collaboration arrangements between firms exist with the aim to coordinate supply chain decisions and to reap these benefits. This dissertation contributes to the understanding of the conditions that are necessary for collaboration in such arrangements and the benefits that can be realized of such collaboration arrangements. This dissertation focuses on the vendor-buyer dyad in the supply chain. We identify and categorize collaboration arrangements that exist in practice, based on a review of the literature and combine this with formal analytical models in the literature. An important factor in the benefits of collaboration is the benefit of reduced costs of transport, by realization of economies of scale in the context of capacity-constrained trucks. As a contribution to the understanding of the dependence of transport costs on the volume transported, we demonstrate how transport tariffs for orders of less-than-a-truckload in size on a single link can be deduced from a basic model. The success of a collaboration arrangement depends on agreement about the distribution of decision authority and collaboration-benefits. We study a collaboration arrangement in which the vendor takes responsibility for managing the buyer's inventory and makes it economically attractive to the buyer by offering a financial incentive, dependent on the maximum level the buyer permits to be stocked. This dissertation demonstrates that this incentive alignment leads to considerable cost savings and near-optimal supply chain decisions

THREE ESSAYS ON VENDOR MANAGED INVENTORY IN SUPPLY CHAINS

Vendor Managed Inventory (VMI), Consignment Inventory (CI) and a combination of both (C&VMI) are supply-chain sourcing agreements between a vendor and customer. VMI allows the vendor to initiate orders on behalf of the customer. In CI, the customer pays for the goods supplied by the vendor only upon use. The vendor under C&VMI decides customer-replenishments, and owns the goods replenished until they are deployed by the customer. Our thesis studies these agreements in three essays. The first essay considers a vendor V that manufactures a particular product at a unique location. That item is sold to a single retailer, the customer C. Three cases are treated in detail: Independent decision making (no agreement between the parties); VMI, whereby the supplier V initiates orders on behalf of C; and Central decision making (both Vendor and Customer are controlled by the same corporate entity). Values of some cost parameters may vary between the three cases, and each case may cause a different actor to be responsible for particular expenses. Under a constant demand rate, optimal solutions are obtained analytically for the customer's order quantity, the vendor's production quantity, hence the parties' individual and total costs in the three cases. Inequalities are obtained to delineate those situations in which VMI is beneficial. The problem setting in the second essay is the same with that of Essay 1, but the sourcing agreements investigated are now CI and C&VMI. In CI, as in the usual independent-sourcing approach, the customer has authority over the timing and quantity of replenishments. CI seems to favour the customer because, in addition, he pays for the goods only upon use. Under a C&VMI agreement, the vendor still owns the goods at the customer's premises, but at least can determine how much to store there. The second essay thus contrasts the cases CI and C&VMI, and compares each of them to a no-agreement case. General conditions under which those cases create benefits for the vendor, the customer and the whole chain are determined. Essay 3 investigates VMI and C&VMI separately for a vendor and multiple customers who face time-varying, but deterministic demand for a single product. In any of those agreements, the vendor seeks the best set of customers to achieve economies of scale. MIP models are developed to find that set of customers, and to determine the vendor's optimal production, transportation, and customer-replenishment quantities. The model for VMI is solved using a heuristic that produces two sub-models, and uses hierarchical solution approach for production, customer-replenishment and transportation decisions. C&VMI model is solved using Lagrangian relaxation. Various numerical examples are used to test the solution approaches used. In the mean time, the customers can guarantee to be no worse off under VMI or C&VMI than the no-agreement case by setting the right levels of maximum inventory. A model to determine those levels and a solution algorithm are also proposed in Essay 3. The first two essays can help a vendor or customer in a supply chain to determine the least costly sourcing option, which depends on the relative values of various cost parameters. A vendor with multiple customers can make use of the results in the third essay, which reveal the best possible economies of scale under VMI or C&VMI. Those customers can guarantee to be no worse of than traditional sourcing when they set the proposed levels of maximum inventory

Vendor Managed Inventory: why you need to talk to your supplier

Purpose The purpose of this paper is to investigate the concept of Vendor Managed Inventory (VMI) from an inter-organisational perspective. Extant literature on VMI tends to investigate the concept from a focal perspective, even though VMI has originally been born as a collaborative arrangement. Design/methodology/approach The paper is based on a literature review and an empirical study. It provides a comprehensive literature review on VMI and an illustrative case study of a supplier and a buyer jointly implementing VMI. Findings The findings of this paper are twofold. First, a literature review uncovers that contemporary research has delimited the analysis of VMI to a focal company perspective as current VMI cost models tend not to capture the picture of the complete supply chain. Second, it demonstrates through an illustrative case study that adoption of an inter-organisational approach to VMI is vital if companies are to optimize their buyer-supplier relationships. Research limitations/implications Future research should test the implications proposed in the empirical section, as this piece of research can be seen as exploratory case study research with the aim of analytical generalizations. Practical implications The inter-organisational VMI cost perspective in supply chains should be emphasized in purchasing departments since such a perspective significantly raises the awareness of the costs incurred in a supply chain. Originality/value Existing research has not explicitly focused on inter-organisational costs incurred by companies implementing VMI. This study seeks to bridge this research gapPeer Reviewe

VMI-type Supply Chains: a Brief Review

The primary purpose of this paper is to highlight for the research community and practitioners the various aspects of using VMI-type supply chains in today’s business environment as well as a number of directions for future studies. In this regard, fifty articles published in major international journals, beginning in 1995, which contribute to the VMI-type supply chains are reviewed via a systematic review methodology. Our findings show there is an incremental growth in employing of VMI strategies in logistic and supply chains. This paper characterizes the design aspects required to configure and establish a VMI-type supply chain in the industry including demand pattern, number of products, contract type between two parties, and profit sharing scheme. Moreover, the current gaps on the current state of VMI-type supply chain in literature are highlighted in last section of this paper that may motivate future studies

Synchronizing the Retail Supply Chain

Dit proefschrift ontwerpt een retail supply chain, die beter en goedkoper is dan de gangbare. Dit wordt bereikt door de distributie te synchroniseren op de productie¬momenten. Goederen zouden direct uit productie al stroomafwaarts moeten bewegen, van fabrikant naar retailer, tegen lage kosten, in volle pallets en in volle auto’s en in hoeveel¬heden die groot genoeg zijn om de vraag tot het volgende productiemoment te dekken. Door de formules van de "Krantenverkoper" en die van de economische ordergrootte (EOQ) aan te passen aan een multi-echelon divergerend distributienetwerk, kan ook theoretisch worden bewezen dat het stroomafwaarts positioneren van voorraden inderdaad optimaal is en dat de voorraden daardoor zullen dalen. De huidige magazijnen van de leveranciers kunnen worden gereduceerd tot overslagpunten, waar goederen van de verschillende fabrieken van een leverancier worden samengebracht om rijden met vollere vrachtwagens mogelijk maken. Kleinere hoeveelheden kunnen leveranciers beter afleveren bij het dichtstbijzijnde distributiecentrum van een retailer, waarna de retailer zelf het deel met bestemming elders verder vervoert. Tenslotte kan de winkelbevoorrading worden aangepast aan de schapruimte, waardoor de werkwijze in de distributiecentra kan worden gerationaliseerd.Piet van der Vlist (1947) was born in Ouderkerk aan den IJssel. He received his high-school diploma from the Marnix Gymnasium in Rotterdam. Also in Rotterdam he graduated as Electronics Engineer at the University of Applied Sciences. He obtained a Master of Science in Electronics at the Delft University of Technology and one in Management Sciences at the University of Twente. He worked 15 years with the Dutch Ministry of Defense on the design and realization of the first generation digital communications systems. Then he joined Bakkenist Management Consultants and later Deloitte Consultancy, together for over 20 years. As consultant he was involved in numerous projects on Data exchange and Supply Chain redesign. Besides that, he was for 11 years (part-time) professor in ICT and Logistics at the Eindhoven University of Technology. Piet wrote and edited several books on data exchange and published numerous articles in business and scientific journals. A fairly good overview of his scientific career can be found in the "Liber Amicorum" that his friends wrote when he left Eindhoven University1. His current research interests lie in the design and management of retail supply chains, all the way from production down to the shelves. He found that the supply chain with the overall lowest costs requires synchronization of distribution to production and not the other way around as current practice seems to dictate. When he had to quit his jobs for health reasons, he finally found the opportunity to devote his time to research and extend the theory that supports Supply Chain Synchronization. He programmed built to purpose simulation models to get a better insight in the dynamics of synchronized supply chains. He joined both the Rotterdam Erasmus University to work with Professor Jo van Nunen and the Eindhoven University of Technology to work with Professor Ton de Kok. This PhD thesis is the result of that effort.This thesis is a design of a retail supply chain that is better and cheaper than the usual one. This is achieved by synchronizing distribution to production. Right from production goods should move downstream the supply chain at low cost in full pallets and in full truckloads, in quantities large enough to cover the needs till the next production run. By extending both the Newsvendor- and the EOQ-formulae to a multi-echelon divergent network, it can be proved that such forward positioning of inventory indeed is optimal and that overall supply chain inventories will drop. The suppliers’ warehouses become stockless cross docking points, where goods from the supplier’s various sourcing plants are brought together to consolidate them into full truckloads. Whenever suppliers deliver lower volumes, they better bring these goods to the nearest retailer’s facility; thereafter the retailer himself should move these goods onward to the proper destination within the retailer’s network. And finally shop replenishment should be rationalized based on shelf coverage, so as to enhance the retailer’s warehouse operations

Supply chain contract design in supplier- versus buyer-driven channels

In the context of supply contract design, the more powerful party has the lib- erty of withholding private information which also improves its bargaining power. Traditionally, the supplier (e.g., manufacturer) has been more powerful, and, hence, the existing literature in the area emphasizes supplier-driven contracts. However, in some current markets, such as the grocery channel, the bargaining power has shifted to the buyer (e.g., retailer). For example, in the United States, large retailers, such as Wal-Mart, exert tremendous market power over their suppliers. Also, with the advent of the Internet, buyers have gained access to much more information about multiple potential suppliers. Hence, this dissertation takes into account the recent trends in power shifting between suppliers and buyers, and it attempts to provide a comparison of optimal supply contract designs in supplier- versus buyer-driven chan- nels. This research is unique in that we explore the impact of both power shifting and information asymmetry while designing optimal supply chain contracts under supply uncertainty and competition. Placing an emphasis on the cases of stochastic and/or price-sensitive demand, we work on several novel problems in stochastic mod- eling, nonlinear and dynamic optimization, and game theory. Hence, this research has roots in applied probability, optimization, inventory theory, game theory, and eco- nomics. The goal is to advance our practical knowledge of designing implementable contracts because such knowledge is crucial for optimizing supply chain performance in the real world. This dissertation provides insights about * the individual and joint impacts of the power structure and information asym- metry on supply chain performance, * the value of information for contract design in supplier- versus buyer-driven channels, * the impact of supply uncertainty and supplier competition on contract design in supplier- versus buyer-driven channels

The Impact of Cost Allocation on Key Decisions of Supply Chain Participants

Abstract - Modern business processes are impossible without a logistics system. Logistics costs constitute the lion’s share in the total product cost. The purpose of our research is to study the dependence of decision-making on the level of logistics costs. In order to achieve the goal set, questionnaire, mathematical modeling and analysis methods were used in the study. The main problems of cost management in supply chains were highlighted. In the course of our research, we concluded that a universal solution to the problem can be developed for a limited segment of enterprises, since there is no identical solution to increasing cost efficiency for different types of enterprises. According to the results of the questionnaire, managers’ decisions on increasing efficiency are dependent on their subjective desires rather than dictated by the economic efficiency. Sixty-seven per cent of the respondents are ready to reject a profitable project due to risks. The questionnaire also showed that only 4% of the managers are ready to quit an already implemented project if it is ineffective. This begs the question: do all projects prove to be really effective after their implementation? A two-factor mathematical model with a dummy variable showed the dependence of increased logistics costs on the period in which they were implemented. The mathematical model obtained during the study will be useful for predicting and budgeting the level of logistics costs. It can also encourage independent enterprises to build advanced mathematical models