On contracts for VMI program with continuous review (r, Q) policy

Based on continuous review (r, Q) policy, this paper deals with contracts for vendor managed inventory (VMI) program in a system comprising a single vendor and a single retailer. Two business scenarios that are popular in VMI program are "vendor with ownership" and "retailer with ownership". Taking the system performance in centralized control as benchmark, we define a contract "perfect" if the contract can enable the system to be coordinated and can guarantee the program to be trusted. A revenue sharing contract is designed for vendor with ownership, and a franchising contract is designed for retailer with ownership. Without consideration of order policy and related costs at the vendor site, it is shown that one contract can perform satisfactorily and the other one is a perfect contract. With consideration of order policy and related costs at the vendor site, it is shown that one contract can perform satisfactorily and the performance of the other one depends on system parameters.

[1]  M. Dresner,et al.  The Inventory Value of Information Sharing, Continuous Replenishment, and Vendor-Managed Inventory , 2008 .

[2]  Ki-Seok Choi,et al.  On Measuring Supplier Performance Under Vendor-Managed-Inventory Programs in Capacitated Supply Chains , 2004, Manuf. Serv. Oper. Manag..

[3]  James Aaron Cooke,et al.  VMI: VERY MIXED IMPACT? , 1998 .

[4]  Yan Dong,et al.  Production , Manufacturing and Logistics Managing supply chain backorders under vendor managed inventory : An incentive approach and empirical analysis , 2009 .

[5]  Awi Federgruen,et al.  An Efficient Algorithm for Computing an Optimal (r, Q) Policy in Continuous Review Stochastic Inventory Systems , 1992, Oper. Res..

[6]  Gérard P. Cachon.  Supply Chain Coordination with Contracts , 2003, Supply Chain Management.

[7]  J. S. Kim,et al.  Game theoretic analysis of the bargaining process over a long-term replenishment contract , 2007, J. Oper. Res. Soc..

[8]  Yunzeng Wang,et al.  Revenue‐Sharing vs. Wholesale‐Price Contracts in Assembly Systems with Random Demand , 2004 .

[9]  Zhongsheng Hua,et al.  A note on channel performance under consignment contract with revenue sharing , 2008, Eur. J. Oper. Res..

[10]  Fernando Bernstein,et al.  Coordinating Supply Chains with Simple Pricing Schemes: The Role of Vendor-Managed Inventories , 2006, Manag. Sci..

[11]  Mark T. Leung,et al.  Stocking policy in a two-party vendor managed channel with space restrictions , 2009 .

[12]  M. J. Rosenblatt,et al.  Coordinating a three-level supply chain with quantity discounts , 2001 .

[13]  Jun-Yeon Lee,et al.  Vendor-managed inventory in a global environment with exchange rate uncertainty , 2011 .

[14]  C.X. Wang.  Random yield and uncertain demand in decentralised supply chains under the traditional and VMI arrangements , 2009 .

[15]  M. J. Rosenblatt,et al.  A generalized quantity discount pricing model to increase supplier's profits , 1986 .

[16]  Jinxing Xie,et al.  Storage-Space Capacitated Inventory System with (r, Q) Policies , 2007, Oper. Res..

[17]  N. Jawahar,et al.  A genetic algorithm for optimal operating parameters of VMI system in a two-echelon supply chain , 2007, Eur. J. Oper. Res..

[18]  Paul H. Zipkin,et al.  Foundations of Inventory Management , 2000 .

[19]  Srinivasan Raghunathan,et al.  Retailer- vs. Vendor-Managed Inventory and Brand Competition , 2004, Manag. Sci..

[20]  Charles J. Corbett,et al.  Stochastic Inventory Systems in a Supply Chain with Asymmetric Information: Cycle Stocks, Safety Stocks, and Consignment Stock , 2001, Oper. Res..

[21]  Michael J. Magazine,et al.  Quantitative Models for Supply Chain Management , 1998 .

[22]  Evan L. Porteus,et al.  Chapter 7.( TGM) Supply Contracts with Quantity Commitments and Stochastic Demand by Ravi Annupindi & Yehuda Bassok Chapter 8. ( TGM) Supply Chain Contracting and Coordination with Stochastic Demand , 1996 .

[23]  Yan Dong,et al.  Analyzing information-enabled stockout management under vendor-managed inventory , 2007, Inf. Technol. Manag..

[24]  Feng Chu,et al.  A Stackelberg game and its improvement in a VMI system with a manufacturing vendor , 2009, Eur. J. Oper. Res..

[25]  Gérard P. Cachon,et al.  Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations , 2005, Manag. Sci..

[26]  Hag-Soo Kim,et al.  Research Note - Revisiting "Retailer- vs. Vendor-Managed Inventory and Brand Competition" , 2008, Manag. Sci..

[27]  Zuo-Jun Max Shen,et al.  Channel Performance Under Consignment Contract with Revenue Sharing , 2004, Manag. Sci..

[28]  W. K. Wong,et al.  Coordinating supply chains with sales rebate contracts and vendor-managed inventory , 2009 .

[29]  Fangruo Chen,et al.  Auctioning Supply Contracts , 2007, Manag. Sci..

[30]  Gérard P. Cachon.  Stock Wars: Inventory Competition in a Two-Echelon Supply Chain with Multiple Retailers , 2001, Oper. Res..

[31]  Michael J. Fry,et al.  Focused Issue: The Use of Information in Managing Supply Chains, Part 2 of 2: Coordinating Production and Delivery Under a (z, Z)-Type Vendor-Managed Inventory Contract , 2001, Manuf. Serv. Oper. Manag..