On Competence of Vendor Managed Inventory in Supply Chains Using Basic Mathematical Inventory Models

In this study a two-echelon single-vendor supply chain is selected to do a cost-based comparison between short-term performances of vendor managed inventory (VMI) and retailer managed inventory (RMI) while the inventory cost includes ordering and storing expenses; rate of consumption and price of good are constant; rate of production and pace of transportation are infinite and shortage is not allowed. The paper after a comprehensive literature review is followed by three cases of single retailer, -retailer and two-retailer chains. Unlike the second case, in the first case, VMI shows an absolute superiority to RMI and this is the reason of devising the third case in which a deeper analysis, including a typical performance assessment system for two-retailer chains, is done. The third case reveals that although VMI is not always the better choice but in most of conditions it can be chosen as the better approach