Vendor Managed Inventory Models for items with perfect and imperfect quality

   

Since SCM (Supply Chain Management) term was introduced in 1982, it has received ever-growing interest both in the literature and industry.   One of the most successfully applied partnerships in SCM is VMI (Vendor Managed Inventory).  Under VMI, the supplier has access to the customer’s inventory data and is responsible for maintaining the inventory level required by the customer.  VMI was popularized after the successful partnership between Wal-Mart and Proctor & Gamble in 1985.

Since then, VMI systems have gained considerable attention in the literature. Many models addressed the optimal inventory policy under VMI. However, two essential issues have not been considered which have reduced the practicality of these models. First, the contract between the supplier and retailer is not reflected in these models. Second, it has been assumed that quality of items is perfect. In this thesis, we are incorporating these practical issues in the decisions regarding VMI system by developing six mathematical models. The common objective of these models is to determine shipping schedule that would maximize the system Profit/minimize the system cost.  Two of these models will consider the case of a single vendor and a single or multi retailers for items with perfect quality. Another two models extend the first two by considering the case of imperfect items. The remaining two models examine the effect of non-zero screening time. Sensitivity analysis will be conducted to show the effect of key model parameters will also be included.

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