The impact of the Vendor Managed Inventory on supply chain performance

Lots of companies try to remain competitive through effective supply chain management. To deal with the supply chain effectively, several strategies based on information sharing have been developed. Vendor Managed Inventory (VMI) is one of them that is often used. The objective of this study is, first, to simulate the performance of supply chains comparing the results of ideal homogeneous supply chains with those having diverse levels. Then, the ability of VMI to upgrade the overall supply chain performance is analyzed. The model developed is composed of one supplier, three manufacturing firms separated by three transport companies and a final customer. A Make to Stock (MTS) supply chain, which uses the Reorder Replenishment Point (ROP) for managing batch production and the (s, S) policy for inventory control are considered. Two VMI implementations between different pairs of tiers are analyzed. Four company performance classes are used to characterize supply chain members. Results show that there are supply chain behavioral differences according to the position of the lower ranked enterprise. It is more suitable to place the most effective company directly upstream of the end customer. Furthermore, VMI introduction seems more interesting for suppliers than for customers. Finally, the advantages of VMI appear to be stronger when the overall supply chain is less effective.