Leader-follower Game in VMI System with Limited Production Capacity Considering Wholesale and Retail Prices

VMI (Vendor Managed Inventory) is a widely used cooperative inventory policy in supply chains in which each enterprise has its autonomy in pricing. This paper discusses a leader-follower Stackelberg game in a VMI supply chain where the manufacturer, as a leader, produces a single product with a limited production capacity and delivers it at a wholesale price to multiple different retailers, as the followers, who then sell the product in dispersed and independent markets at retail prices. An algorithm is then developed to determine the equilibrium of the Stackelberg game. Finally, a numerical study is conducted to understand the influence of the Stackelberg equilibrium and market related parameters on the profits of the manufacturer and its retailers. Through the numerical example, our research demonstrates that: (a) the market related parameters have significant influence on the manufacturer’ and its retailers’ profits; (b) a retailer’s profit may not be necessarily lowered when it is charged with a higher inventory cost by the manufacturer; (c) the equilibrium of the Stackelberg equilibrium benefits the manufacturer.Stackelberg Game;Supply Chain;Vendor Managed Inventory

Optimal Supply Network with Vendor Managed Inventory in a Healthcare System with RFID Investment Consideration

Supply Chain Management in the healthcare sector faces several significant challenges, including complexity in healthcare systems, high supply chain costs, balancing quality and costs, delay in delivery, product availability from vendors, inventory waste, and unpredictability and uncertainty. Among those challenges, having an effective inventory management system with an optimal supply network is important to improve the match between supply and demand, which would improve the performance of for healthcare firms. Vendor Managed Inventory (VMI) system is a replenishment solution in which the vendor monitors and decides the time and the quantity of the inventory replenishment of their customers subject to their demand information exchange. A VMI contract in the location-inventory assignment problem is a decision tool for management in the healthcare industry, in which it enables the management to have a cost and service effective decision tool to critically re-evaluate and examine all areas of operations in a SC network looking for avenues of optimization. This dissertation is based on a real-world problem arising from one of the world\u27s leading medical implant supply company applied to a chain of hospitals in the province of Ontario. The chain of hospitals under study consists of 147 hospitals located in Ontario, Canada. The vendor is a supplier of three types of medical implants (a heart valve, an artificial knee, and a hip). In Chapter 2 of this dissertation, we present an optimal supply healthcare network with VMI and with RFID consideration, in which we shed light on the role of the VMI contract in the location-inventory assignment problem and integrate it with both the replenishment policy assignment and the Radio Frequency Identification (RFID) investment allocation assignment in healthcare SC networks using both VMI and direct delivery policies. A numerical solution approach is developed in the case of the deterministic demand environment, and we end up with computational results and sensitivity analysis for a real-world problem to highlight the usefulness and validate the proposed model. We extend our research of integrating the VMI contract in the location-inventory assignment problem with the replenishment policy assignment under a deterministic demand environment to include the stochastic demand environment. The impact of the uncertainty of the demand as a random variable following two types of distributions, normal and uniform distributions, is studied in Chapter 3. Motivated by the lack of investigations and comparative studies dealing with the preference of dealing with VMI contracts to other traditional Retailer Managed Inventory (RMI) systems, we provide in Chapter 4 of this dissertation a comparative study in which we compare the total cost of the VMI system with another two situations of traditional RMI systems: first, a traditional RMI system with a continuous replenishment policy for all hospitals and with assigned storage facilities and second, a traditional RMI system with a direct delivery policy for all hospitals without assigning a storage facility. Computational results, managerial insights, sensitivity analysis, and solution methodologies are provided in this dissertation. Keywords: Vendor Managed Inventory, healthcare system, location-inventory, RFID technology, supply-chain network, stochastic demand, location-inventory assignment problem, and retailer managed Inventory

Analysis of a Vendor Managed Consignment Inventory System with Kan-ban Withdrawals and Payment Delays

Vendor Managed Inventory (VMI) System with Consignment Inventory (CI) policy is a solution for many supply chain leaders in a highly competitive market. In this paper, totally eight different inventory supply chain models are studied. The profit function of supplier and manufacturer in different environments are compared in order to show the profitability of the overall supply chain management system in a manufacturing industry with different time horizons. The inventory systems are applied on a supply chain consisting of a single supplier and a manufacturer. The main focus of this study is to analyze the effect of payment deferral and the time value of money in push and pull (Kanban) manufacturing systems when VMI-CI policy is applied

Vendor Managed Inventory for Multi-Vendor Single-Manufacturer Supply Chain: A Case Study of Instant Noodle Industry

This paper develops a vendor-managed inventory (VMI) model for a multiple-vendor, single-manufacturer supply chain, in which the first stage members can be traders and/or producers and the second stage member is a manufacturer. The model utilizes a realistic transportation cost which is dependent on the sizes (small- or medium-sized) of trucks. It can determine suitable sizes and numbers of trucks that minimize the transportation cost. A genetic algorithm (GA) technique, implemented in MATLAB software, is used to determine the best solution to the problem. A case study in the instant noodle industry is conducted to demonstrate the usefulness of the proposed model. Based on the experimental results, the VMI model has reasonable behaviors using sensitivity analysis. To reduce the inventory level of raw materials, the penalty cost may be set at a relatively high level or the upper inventory limits may be set at relatively low levels, without significantly affecting the average total cost per period of the entire supply chain. When the vendors are allowed to make decision independently, the solution is still the same as the solution from the proposed VMI model, which means that the manufacture does not take advantage of the vendors

Nash Game Model for Optimizing Market Strategies, Configuration of Platform Products in a Vendor Managed Inventory (VMI) Supply Chain for a Product Family

This paper discusses how a manufacturer and its retailers interact with each other to optimize their product marketing strategies, platform product configuration and inventory policies in a VMI (Vendor Managed Inventory) supply chain. The manufacturer procures raw materials from multiple suppliers to produce a family of products sold to multiple retailers. Multiple types of products are substitutable each other to end customers. The manufacturer makes its decision on raw materials’ procurement, platform product configuration, product replenishment policies to retailers with VMI, price discount rate, and advertising investment to maximize its profit. Retailers in turn consider the optimal local advertising and retail price to maximize their profits. This problem is modeled as a dual simultaneous non-cooperative game (as a Nash game) model with two sub-games. One is between the retailers serving in competing retail markets and the other is between the manufacturer and the retailers. This paper combines analytical, iterative and GA (genetic algorithm) methods to develop a game solution algorithm to find the Nash equilibrium. A numerical example is conducted to test the proposed model and algorithm, and gain managerial implications.supply chain management;nash game model;vendor managed inventory

Essays in Measuring, Controlling, and Coordinating Supply Chain Inventory and Transportation Operations

Supply chain collaboration programs, such as continuous replenishment program (CRP), is among the most popular supply chain management practices. CRP is an arrangement between two partners in a supply chain to share information on a regular basis for lowering logistics costs while maintaining or increasing service levels. CRP shifts the replenishment responsibility to the upstream partner to avoid the bullwhip effect across the supply chain. This dissertation aims to quantify, measure, and expand the benefits of CRP for the purpose of reducing logistics cost and improving customer service. The developed models in this dissertation are all applied in different case studies supported by a group of major healthcare partners. The first research contribution, discussed in chapter 2, is a comprehensive data-driven cost approximation model that quantifies the benefits of CRP for both partners under three cost components of inventory holding, transportation and ordering processing without imposing assumptions that normally do not hold in practice. The second contribution, discussed in chapter 3, is development of a verifiable efficiency measurement system to ensure the benefits of CRP for all partners. Multi-functional efficiency metrics are designed to capture the trade-off in gaining efficiency between multiple functions of logistics (i.e. inventory efficiency, transportation efficiency, and order processing efficiency). In addition, a statistical process control (SPC) system is developed to monitor the metrics over time. We discuss suitable SPC systems for various time series behaviors of the metrics. The third contribution of the dissertation, discussed in chapter 4, is development of a multi-objective decision analysis (MODA) model for multi-stop truckload (MSTL) planning. MSTL is becoming increasing popular among shippers while is experiencing significant resistance from carriers. MSTL is capable of reducing the shipping cost of shippers substantially but it can also disrupt carriers’ operations. A MODA model is developed for this problem to incorporate the key decision criteria of both sides for identifying the most desirable multi-stop routes from the perspective both decision makers

Synchronization and decoupling of plants piloting in a supply chain dedicated to customized mass production.

The synchronization of the production of a manufacturing supplier, who makes alternate components assembled on his industrial customer’s work station with this client’s production specialized in mass production of highly diversified products, must take into account the improvement of their knowledge of the final demand (displacement of the Order Penetration Point) and the distance of some of the suppliers. The customer periodically forwards firm orders to his supplier calculated so as to preclude any production line stoppage. It is necessary that the supplier honor them to ensure the decoupling of the control of these two entities in the supply chain and define the efficiency of synchronization. In the considered context, the supplier also receives all available projected information from the industrial customer (final orders, firm on the short term, and structural characteristics of the final demand beyond). The efficiency of the supplier depends on the proper use of all information, notably when the production cycle of alternate components is longer than the demand cycle. In the study of the customer’s requirements, it is necessary to take into account the batch constraints linked to transportation, which compels the customer to hold safety stocks even though the set up organization guarantees that orders will be duly honored. The determinants of these stocks will be put in evidence. Similarly at the supplier, safety stocks will be necessary if the production process involves grouping in batches.synchronisation de la production dans une chaîne logistique; stock de sécurité; chaîne logistique;

Leader-follower Game in VMI System with Limited Production Capacity Considering Wholesale and Retail Prices

VMI (Vendor Managed Inventory) is a widely used cooperative inventory policy in supply chains in which each enterprise has its autonomy in pricing. This paper discusses a leader-follower Stackelberg game in a VMI supply chain where the manufacturer, as a leader, produces a single product with a limited production capacity and delivers it at a wholesale price to multiple different retailers, as the followers, who then sell the product in dispersed and independent markets at retail prices. An algorithm is then developed to determine the equilibrium of the Stackelberg game. Finally, a numerical study is conducted to understand the influence of the Stackelberg equilibrium and market related parameters on the profits of the manufacturer and its retailers. Through the numerical example, our research demonstrates that: (a) the market related parameters have significant influence on the manufacturer’ and its retailers’ profits; (b) a retailer’s profit ma

Decision support system for vendor managed inventory supply chain:a case study

Vendor-managed inventory (VMI) is a widely used collaborative inventory management policy in which manufacturers manages the inventory of retailers and takes responsibility for making decisions related to the timing and extent of inventory replenishment. VMI partnerships help organisations to reduce demand variability, inventory holding and distribution costs. This study provides empirical evidence that significant economic benefits can be achieved with the use of a genetic algorithm (GA)-based decision support system (DSS) in a VMI supply chain. A two-stage serial supply chain in which retailers and their supplier are operating VMI in an uncertain demand environment is studied. Performance was measured in terms of cost, profit, stockouts and service levels. The results generated from GA-based model were compared to traditional alternatives. The study found that the GA-based approach outperformed traditional methods and its use can be economically justified in small- and medium-sized enterprises (SMEs)