The Inventory Benefit of Shipment Coordination and Stock Rebalancing in a Supply Chain

Abstract

In this paper, we examine two information-based supply-chain efforts that are often linked to Vendor-Managed Inventory (VMI) programs. Specifically, we consider a supplier serving multiple retailers located in a close proximity. The first effort uses information on the retailers' inventory positions to coordinate shipments from the supplier to enjoy economies of scale in shipments, such as full truckloads.The second effort uses the same information for eventual unloading of the shipments to the retailers to rebalance their stocking positions. How much benefit do we gain from such initiatives? What are the relative benefits of the two initiatives? What are the drivers of such benefits? This paper seeks answers to these questions.Vendor-Managed Inventory, Supply Chain Management, Inventory Management

Factory gate pricing: An analysis of the Dutch retail distribution

“…A well-known concept that is related to FGP is Vendor Managed Inventory (VMI, see for example, Cheung andLee 2002 andDisney et al 2003). VMI also places the control of inventory and primary transportation, and sometimes even secondary transportation (Silver et al 1998) The aim of the present study was to quantify the expected benefits of FGP for the Dutch retail sector.…”

Models for Supply Chains in E-Business

“…Lee et al (2000) study the value of information in a two-level supply chain with nonstationary end demand and show that value of information could be high, particularly in cases where demand may be correlated over time. The effect of vendor managed inventory (VMI) systems, where the buyer shares demand information with the supplier who, in turn, manages the buyer's inventory, have also been extensively studied by researchers (see Cetinkaya andCheung and.…”

A stochastic model for joint inventory and outbound shipment decisions

“…One stream of work examines the benefits of information sharing and channel coordination under VMI arrangements (Fry et al, 2001, Kaipia et al, 2002, Disney and Towill, 2003, Dong and Xu, 2003, Piplani and Viswanathan, 2003, Gerchak and Wang, 2004, Mishra and Raghunathan, 2004, Toptal and Ç etinkaya, 2006, and it is only distantly related to our work. The other stream examines the flexibility that VMI offers for a vendor in delivering stock to its retailers (Campbell et al, 1998, Ç etinkaya and Lee, 2000, Axsäter, 2001, Cheung and Lee, 2002, Ç etinkaya, 2004, Kleywegt et al, 2004, and it is more closely related to our work. For example, Campbell et al (1998) and Kleywegt et al (2004) study the flexibility in constructing improved delivery routes for multiple retailers whereas Cheung and Lee (2002) study the flexibility in coordinating shipments to multiple retailers and stock rebalancing.…”

“…The other stream examines the flexibility that VMI offers for a vendor in delivering stock to its retailers (Campbell et al, 1998, Ç etinkaya and Lee, 2000, Axsäter, 2001, Cheung and Lee, 2002, Ç etinkaya, 2004, Kleywegt et al, 2004, and it is more closely related to our work. For example, Campbell et al (1998) and Kleywegt et al (2004) study the flexibility in constructing improved delivery routes for multiple retailers whereas Cheung and Lee (2002) study the flexibility in coordinating shipments to multiple retailers and stock rebalancing. Literature dealing directly with the benefits of VMI that relate to shipment consolidation (Ç etinkaya and Lee, 2000, Axsäter, 2001, Ç etinkaya, 2004 is also included in the second stream of work.…”