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ISSN : 1738-3110

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Early Access e-Submission

Vol.15 No.8

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Vendor-Managed Inventory in Three Stage Supply Chain

The Journal of Distribution Science / The Journal of Distribution Science, (P)1738-3110; (E)2093-7717
2017, v.15 no.8, pp.15-28
https://doi.org/https://doi.org/10.15722/jds.15.8.201708.15
Ryu, Chungsuk
Ryu,, C. (2017). Vendor-Managed Inventory in Three Stage Supply Chain. The Journal of Distribution Science, 15(8), 15-28, https://doi.org/https://doi.org/10.15722/jds.15.8.201708.15

Abstract

Purpose - Many researchers analyze VMI as a supply chain collaboration program to reveal its true value. Most of them focus on the dyadic relationship in two stage supply chain systems. This study examines the effect of VMI when it is applied to the different parts of three stage supply chain systems. Research design, data, and methodology - Based on three stage supply chain, this study compares three different systems including full VMI, partial VMI, and non-VMI by using mathematical models. The performances of three systems are compared with the numerical examples of the proposed supply chain models. Results - The numerical examples reveal that full VMI where the manufacturer controls inventories at all stages outperforms any other systems in terms of the system profit and enables all individual members to gain greater profits than non-VMI. Meanwhile, under partial VMI where VMI is implemented between the wholesaler and retailer, only these two members improve their performances and the manufacturer who does not belong to VMI makes less profit than even under non-VMI. This study also examines the impact of market size and profit margin on the system performance. Conclusions - The result of this study supports the common belief that VMI secures the best result when it is applied to the entire supply chain system. The additional findings from the numerical analysis are discussed.

keywords
Supply Chain Management, Vendor-Managed Inventory (VMI), Supply Chain Collaboration, Optimization Problem

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