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

Hamontree, C., Ouelhadj, D. and Beullens, Patrick (2013) Coordination single buyer-supplier with vendor managed inventory from the net present value perspective. Journal of Applied Operational Research, 5 (2), 56-69.

Abstract

This paper developed the coordination inventory models with vendor-managed inventory (VMI). The mathematical models are derived from Net Present Value (NPV) functions for the single-buyer single-supplier under deterministic conditions. The main objective is to develop a model to find optimal lot-size and profit function in supply chain. The model is analyzed under two different scenarios consisted of without-coordination and coordination inventory policy. In the case of without coordination the buyer and the supplier act independently to optimise their profits or costs; while in the coordination scenario both actors are agree to joint decision policy to determine the optimal variables to achieve profit (or cost) functions. The classical inventory model is applied for non-coordination scenario as the based case to explore the effects of NPV to optimal lot-size and profit function. In the proposed model, four different VMI strategies which derived from NPV 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 profit function derived from NPV is given the total profit in supply chain better than classical inventory model. Furthermore, coordinated VMI approaches derived from NPV have shown that the VMI+ can achieve 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

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Contributors

Author: Patrick Beullens

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