The benefitofVMIstrategiesinastochasticmulti-productserialtwoechelonsystem

We consideramulti-productserialtwoecheloninventorysystemwithstochasticdemand.Inventoriesat the downstreamlocationarereplenishedperiodicallyusinganautomaticorderingsystem.Undervendor managed inventorystrategiestheupstreamstageisallowedtoadapttheseordersinordertobenefit from economiesofscale.WeproposethreedifferentVMIstrategies,aimingtoreducetheorderpicking cost attheupstreamlocationandthetransportationcostsresultinginreducedtotalsupplychaincosts.In a detailednumericalstudytheVMIstrategiesarecomparedwitharetailermanagedinventorystrategy for twodifferentdemandmodelssuitableforslowmovingproducts.Itisshownthatifinventoryholding costs arelow,comparedtohandlingandtransportationcosts,efficienciesatthewarehouseareimproved and totalsupplychaincostsarereduced.