A Mechanism Design Approach to Vendor Managed Inventory

2020 ◽  
Vol 66 (6) ◽  
pp. 2628-2652 ◽  
Author(s):  
Bharadwaj Kadiyala ◽  
Özalp Özer ◽  
Alain Bensoussan
Keyword(s):  
Supply Chain ◽  
Inventory Management ◽  
Operations Management ◽  
Inventory Level ◽  
Local Market ◽  
Management Problem ◽  
Vendor Managed Inventory ◽  
Market Conditions ◽  
Market Signals ◽  
Pos Data

This paper studies an inventory management problem faced by an upstream supplier that is in a collaborative agreement, such as vendor-managed inventory (VMI), with a retailer. A VMI partnership provides the supplier an opportunity to manage inventory for the supply chain in exchange for point-of-sales (POS)- and inventory-level information from the retailer. However, retailers typically possess superior local market information and as has been the case in recent years, are able to capture and analyze customer purchasing behavior beyond the traditional POS data. Such analyses provide the retailer access to market signals that are otherwise hard to capture using POS information. We show and quantify the implication of the financial obligations of each party in VMI that renders communication of such important market signals as noncredible. To help institute a sound VMI collaboration, we propose learn and screen—a dynamic inventory mechanism—for the supplier to effectively manage inventory and information in the supply chain. The proposed mechanism combines the ability of the supplier to learn about market conditions from POS data (over multiple selling periods) and dynamically determine when to screen the retailer and acquire his private demand information. Inventory decisions in the proposed mechanism serve a strategic purpose in addition to their classic role of satisfying customer demand. We show that our proposed dynamic mechanism significantly improves the supplier’s expected profit and increases the efficiency of the overall supply chain operations under a VMI agreement. In addition, we determine the market conditions in which a strategic approach to VMI results in significant profit improvements for both firms, particularly when the retailer has high market power (i.e., when the supplier highly depends on the retailer) and when the supplier has relatively less knowledge about the end customer/market compared with the retailer. This paper was accepted by Gad Allon, operations management.

scholarly journals A literature review on multi-echelon inventory management: the case of pharmaceutical supply chain

2018 ◽  
Vol 200 ◽  
pp. 00013 ◽  
Author(s):  
Nouçaiba Sbai ◽  
Abdelaziz Berrado
Keyword(s):  
Supply Chain ◽  
Customer Service ◽  
Inventory Management ◽  
Raw Materials ◽  
Integrated Approach ◽  
Service Level ◽  
Pharmaceutical Products ◽  
Management Problem ◽  
Pharmaceutical Supply Chain ◽  
Customer Service Level

Inventory management remains a key challenge in supply chain management. Many companies recognize the benefits of a good inventory management system. An effective inventory management helps reaching a high customer service level while dealing with demand variability. In a complex supply chain network where inventories are found across the entire system as raw materials or finished products, the need for an integrated approach for managing inventory had become crucial. Modelling the system as a multi-echelon inventory system allows to consider all the factors related to inventory optimization. On the other hand, the high criticality of the pharmaceutical products makes the need for a sophisticated supply chain inventory management essential. The implementation of the multi-echelon inventory management in such supply chains helps keeping the stock of pharmaceutical products available at the different installations. This paper provides an insight into the multi-echelon inventory management problem, especially in the pharmaceutical supply chain. A classification of several multi-echelon inventory systems according to a set of criteria is provided. A synthesis of multiple multi-echelon pharmaceutical supply chain problems is elaborated.

scholarly journals BENEFITS ASSESSMENT OF TRAINING ON SUPPLY CHAIN MANAGEMENT

2015 ◽  
Vol 7 (2) ◽  
Author(s):  
Claudemir L. Tramarico ◽  
Fernando A. S. Marins ◽  
Ligia M. S. Urbina ◽  
Valerio A. P. Salomon
Keyword(s):  
Supply Chain ◽  
Supply Chain Management ◽  
Inventory Management ◽  
Operations Management ◽  
Evaluation Model ◽  
Core Competencies ◽  
Critical Factor ◽  
Organizational Capability ◽  
Chain Management ◽  
Chemical Company

<p>Supply chain management (SCM) is a critical factor in the current global scenario. This organizational capability has a recent knowledge base, which is being accumulated, validated, and certified by groups like the Association for Operations Management (APICS). Therefore, training in SCM has been growing as one of the most convenient ways of becoming “Certified in Production and Inventory Management” (CPIM) from APICS. Companies all over the world have invested in SCM training; however, some companies have conditioned the continuity of their training programs to the benefits assessment. This paper contributes by proposing an evaluation model for specific program training on SCM. This model was applied in a global chemical company, which allowed capturing its impact on organizational and individual competencies, as well as on the core competencies. The proposed model includes the Analytic Hierarchy Process (AHP) and concepts in the SCM literature. The main result revealed by this research is that an SCM training based on APICS CPIM is really perceived as beneficial, in individual or organizational terms, for a real-world company. Therefore, this company should be confident that its SCM training program is improving and strengthening its core competencies.</p>

Inventory Management in Competition Environment Based on Customer Service

2011 ◽  
Vol 58-60 ◽  
pp. 2141-2146
Author(s):  
Xiao Di ◽  
Bao Xing
Keyword(s):  
Supply Chain ◽  
Supply Chains ◽  
Customer Service ◽  
Inventory Management ◽  
Demand Uncertainty ◽  
Management Policy ◽  
Management Decision ◽  
Inventory Level ◽  
On Demand ◽  
Optimal Policies

Based on demand uncertainty, the paper studies inventory management decision of two competing supply chains from the perspective of customer service. The paper mainly discusses two different inventory strategies, which are widely used, that is, consignment stock and VMI, and analyzes the optimal policies under three competitive scenarios, which consist of using consignment stock in both supply chains (CC mode), using VMI in both supply chains (DD mode), and using consignment stock in one supply chain but VMI another (VC mode). The paper compares equilibrium inventory level and profit of supply chain in different competitive modes, and concludes that both supply chains use VMI is equilibrium, which means that when manufacturers have right to choose inventory management policy, they prefer VMI. But it isn’t paradoxical with the phenomenon that consignment stock is common in reality, because manufacturers are forced to use consignment by retailer’s channel power.

Value Creation in Electronic Supply Chains by Adoption of a Vendor Managed Inventory System

2013 ◽  
pp. 229-240
Author(s):  
Yasanur Kayikci
Keyword(s):  
Supply Chain ◽  
Customer Satisfaction ◽  
Data Exchange ◽  
Decision Makers ◽  
Path Model ◽  
Inventory Level ◽  
Supply Side ◽  
Pls Regression ◽  
Vendor Managed Inventory ◽  
The Relationship

Many strategies have been developed to manage supply chain operations effectively. Vendor Managed Inventory (VMI) system is one of the prevalent strategic tools of the supply side logistics based on the electronic data exchange and business process automation among the suppliers and customers to enhance the competitive advantage. VMI is widely used in different industries including automotive sector. The VMI concept is a continuous replenishment program where suppliers are given access to demand and inventory level of customers and they are fully responsible for managing and replenishing the customer’s stock. VMI’s extension on customer satisfaction cannot be perceived sufficiently by decision-makers who are responsible to develop and invest in the customer-supplier relationship. This paper presents a path model using the method of Partial Least Squares (PLS) regression to give insight to decision-makers to understand effect of the VMI adoption on customer satisfaction. This paper investigates both determinants of relative factors of successful VMI adoption and the relationship in the supply chain with an empirical automotive industry case. The results show that the collaboration and coordination between customer and supplier and infrastructure of the information-sharing are the important dimensions to add value to the supply chain and to enhance customer satisfaction.

scholarly journals Investigating Inventory Strategy Under Demand Distribution Fluctuation in Dual-Channel Supply Chain

2021 ◽  
Vol 8 ◽  
Author(s):  
Nai-Ru Xu ◽  
Jie Cheng ◽  
Zheng-Qun Cai
Keyword(s):  
Supply Chain ◽  
Inventory Management ◽  
Distribution System ◽  
Demand Uncertainty ◽  
Management Problem ◽  
Market Demand ◽  
Supply Chain System ◽  
Demand Distribution ◽  
Dual Channel ◽  
Dual Channel Supply Chain

When manufacturers construct a dual-channel distribution system, which includes online and offline sales channels, they need to solve the inventory management problem to ensure supply and reduce inventory costs of the supply chain system. The dual-channel supply chain is the research object, and the inventory decision model is designed to achieve optimal profit when market demand is divided into online and offline demands. The results of the numerical analysis and simulations, conducted using MATLAB, indicate that both the manufacturer and the retailer increase their inventories and that their profits decrease when demand uncertainty increases. Besides, the increase in the online demand ratio causes the increase in the manufacturer’s inventory and reduces the profits of the retailer and the entire supply chain.

Value Creation in Electronic Supply Chains by Adoption of a Vendor Managed Inventory System

2011 ◽  
Vol 3 (4) ◽  
pp. 17-27
Author(s):  
Yasanur Kayikci
Keyword(s):  
Supply Chain ◽  
Customer Satisfaction ◽  
Automotive Industry ◽  
Data Exchange ◽  
Decision Makers ◽  
Path Model ◽  
Inventory Level ◽  
Vendor Managed Inventory ◽  
The Relationship ◽  
Relative Factors

Many strategies have been developed to manage supply chain operations effectively. Vendor Managed Inventory (VMI) system is one of the prevalent strategic tools of the supply side logistics based on the electronic data exchange and business process automation among the suppliers and customers to enhance the competitive advantage. VMI is widely used in different industries including automotive sector. The VMI concept is a continuous replenishment program where suppliers are given access to demand and inventory level of customers and they are fully responsible for managing and replenishing the customer’s stock. VMI’s extension on customer satisfaction cannot be perceived sufficiently by decision-makers who are responsible to develop and invest in the customer-supplier relationship. This paper presents a path model using the method of Partial Least Squares (PLS) regression to give insight to decision-makers to understand effect of the VMI adoption on customer satisfaction. This paper investigates both determinants of relative factors of successful VMI adoption and the relationship in the supply chain with an empirical automotive industry case. The results show that the collaboration and coordination between customer and supplier and infrastructure of the information-sharing are the important dimensions to add value to the supply chain and to enhance customer satisfaction.

Combating Petroleum Movable Assets Theft Through Supply Chain Management System

2021 ◽  
Author(s):  
Chinyere Obi ◽  
Henry Ijomanta ◽  
Ebuka Ifeduba ◽  
Oluchukwu Okoh
Keyword(s):  
Supply Chain ◽  
Inventory Management ◽  
Asset Management ◽  
Value At Risk ◽  
Management System ◽  
Low Cost ◽  
Local Market ◽  
Minimal Risk ◽  
Asset Protection ◽  
Supply Chain Management System

Abstract The Niger Delta land and swamp operators have endured severe hostility, theft, and asset vandalism over time. The offshore assets seem insulated from these incessant thefts due to difficulty accessing the facility and the compactness of the operations resulting in efficient security surveillance. However, this is not the case for land and swamp assets, usually with wide asset footprints resulting from traditional, supposedly easy, and low-cost development concepts. These conventional concepts resulted in wells drilled from multiple locations with multiple flowlines/pipelines crossing many communities and making efficient surveillance a near impossible activity. The attackers usually target movable assets like wellhead accessories, Christmas tree, and flowlines in low-activity areas, and the non-active wells/flowlines are good minimal risk candidates. This act increases the cost of operations and, in most cases, results in environmental pollution because the vandals do not take the necessary precautions as needed for environmentally safe operations. Interestingly, in most cases, these stolen assets find their way into the local market, where they are refurbished and resold to unsuspecting operators. To curb this menace, an opportunity exists for industry collaboration by applying an intelligent supply chain and asset inventory management system. This paper reviews the current asset protection techniques, evaluates the value at risk, and proposes innovative ways of combating theft using digital technology and intelligent asset management techniques.

The Development and Analysis of Environmentally Responsible Supply Chain Models

2017 ◽  
pp. 52-82
Author(s):  
Ehab Bazan ◽  
Mohamad Y. Jaber
Keyword(s):  
Mathematical Modeling ◽  
Decision Making ◽  
Supply Chain ◽  
Supply Chain Management ◽  
Inventory Management ◽  
Operations Management ◽  
Environmentally Conscious ◽  
Chain Management ◽  
Environmentally Responsible ◽  
Decision Making Processes

Inventory management and supply chain management are integral issues and prime areas of concern in production and operations management, and industrial engineering. There is a drive for businesses and organizations to be accountable for their environmental impacts. Guaranteeing environmentally conscious supply chain operations is strongly linked to an organization's sustainability and overall success. The responsible management of forward and return product flows in production and inventory environments is a rapidly increasing requirement. This can be attributed to economic, environmental and/ or regulatory motivations. Mathematical modeling of such systems assists decision-making processes and provided a better understanding of the behavior of such production and inventory environments.

scholarly journals Algorithmic Approaches to Inventory Management Optimization

Processes ◽  
2021 ◽  
Vol 9 (1) ◽  
pp. 102
Author(s):  
Hector D. Perez ◽  
Christian D. Hubbs ◽  
Can Li ◽  
Ignacio E. Grossmann
Keyword(s):  
Linear Programming ◽  
Supply Chain ◽  
Reinforcement Learning ◽  
Inventory Management ◽  
Production Capacity ◽  
Service Level ◽  
Management Problem ◽  
Deterministic Models ◽  
Multi Stage ◽  
Algorithmic Approaches

An inventory management problem is addressed for a make-to-order supply chain that has inventory holding and/or manufacturing locations at each node. The lead times between nodes and production capacity limits are heterogeneous across the network. This study focuses on a single product, a multi-period centralized system in which a retailer is subject to an uncertain stationary consumer demand at each time period. Two sales scenarios are considered for any unfulfilled demand: backlogging or lost sales. The daily inventory replenishment requests from immediate suppliers throughout the network are modeled and optimized using three different approaches: (1) deterministic linear programming, (2) multi-stage stochastic linear programming, and (3) reinforcement learning. The performance of the three methods is compared and contrasted in terms of profit (reward), service level, and inventory profiles throughout the supply chain. The proposed optimization strategies are tested in a stochastic simulation environment that was built upon the open-source OR-Gym Python package. The results indicate that, of the three approaches, stochastic modeling yields the largest increase in profit, whereas reinforcement learning creates more balanced inventory policies that would potentially respond well to network disruptions. Furthermore, deterministic models perform well in determining dynamic reorder policies that are comparable to reinforcement learning in terms of their profitability.

scholarly journals Multiperiod Dynamic Pricing and Inventory Control Decisions for an Omnichannel BOPS Retailer with Reference Price Effects

2021 ◽  
Vol 2021 ◽  
pp. 1-21
Author(s):  
Yuan Li
Keyword(s):  
Inventory Management ◽  
Dynamic Pricing ◽  
Reference Price ◽  
Planning Horizon ◽  
Sensitivity Analyses ◽  
Inventory Level ◽  
Management Problem ◽  
Optimal Decisions ◽  
Price Effects ◽  
Joint Pricing

This paper utilizes the consumers’ reference price in prospect theory to analyze an omnichannel retailer’s multiperiod pricing and inventory management problem in which consumers can cancel their orders before payment and return the products after payment if the products do not meet their expectation. The omnichannel retailer’s optimal equilibrium pricing and ending inventory level are derived under reference price effects by maximizing the discounted total profit over the infinite planning horizon, where the optimal decisions we discussed under two scenarios: loss neutrality and loss aversion. The analysis shows that the convergence of the pricing and ending inventory level toward their equilibrium is from above or below, depending on the relative location of the initial reference price with respect to the unique equilibrium price. Moreover, a set of sensitivity analyses is discussed to characterize the impacts of system parameters on the optimal decisions. This research fills the gap of behavioral operation in the field of omnichannel joint pricing and inventory management.

Sign in / Sign up

Export Citation Format

Share Document