An integrated single-vendor multi-buyer production inventory model based on the consignment stock case with cross-shipments between buyers.

Abstract

Vendor managed inventory (VMI) is an approach used by several companies to monitor and control stocks of products. In this paper, we investigate how the Consignment Stock (CS), a particular VMI policy, may exemplify a successful strategy for both buyers and supplier. CS suppresses the vendor’s inventory and uses the buyers’ warehouses to stock its products. This paper considers the problem of one vendor with multiple buyers collaborating under VMI with a consignment stock policy with the possibility of cross-shipments between buyers and considering the inventory and shipment storage capacities. We consider transshipment between buyers as a tool to decrease the total cost faced by the vendor and buyers. Numerical results are also presented to illustrate it and discuss its importance. The cost function is shown to be jointly convex in the shipment sizes between the vendors and between the supplier and the vendors. The number of shipments between suppliers and vendors can then be found via a proposed genetic algorithm.