Generalized joint replenishment model for multi-retailer scenario under VMI

Abstract

Vendor managed inventory is a well established supply chain coordination practice wherein the supplier is responsible for managing the inventory at the retail points. In particular, the supplier takes care of, when to order and how much to order on behalf of the retailers. This paper considers a single vendor – multiple retailer setting where vendor takes inventory replenishment decisions for retailers such that the replenishment quantities are within an upper bound that is mutually agreed upon in the contractual agreement. Although various replenishment models under such a setting have been developed in the literature, this paper develops a generalized joint replenishment model by highlighting the role of cycle ratio(setup cost/holding cost * demand). We compute the optimal replenishment frequency, quantity and total cost. We also show that our model leads to the minimum cost in general as compared to the existing models that give minimum cost only under certain specific conditions.