Coordination buyer and supplier with vendor managed inventory from the net present value perspective

Hamontree, C., Ouelhadj, D. and Beullens, Patrick (2012) Coordination buyer and supplier with vendor managed inventory from the net present value perspective. Lecture Notes in Management Science, 4, 136-144.

Abstract

This paper considers a two-level supply chain consisting of single-buyer single-supplier under deterministic conditions and constant demand rate. The main objective is to find optimal lot-sizing decisions and inventory policies, which derive from Net Present Value (NPV) framework. We study the models in two cases; individual and coordination decisions. In the individual case the buyer and the supplier act independently to optimise their profits or costs; while in the coordination case both actors are considered to determine the optimal variables to achieve profit (or cost) functions. The classic single-buyer single-supplier inventory model is applied in the individual model and Vendor-Managed Inventory (VMI) strategies are applied in the coordination models where the supplier is authorized to manage the buyer’s inventory and make all the replenishment decisions. The experimental results have shown that the optimal solution is given from a coordinated VMI approach derived from NPV framework. Furthermore, the numerical examples have shown that the optimal solution of VMI+ achieves a very good coordination. This model guarantees that the profit function for both players remains the same without coordination and increases as a result of coordination

This record has no associated files available for download.

Contributors

Author: Patrick Beullens

Download statistics