PRESENTING A NOVEL VENDOR MANAGED INVENTORY MODEL FOR RETAILER SELECTION IN COMPETITIVE CONDITION

Vendor management inventory, as one of the inventory management methods, reduces the cost of inventory in the chain, quick response to customers, increased service level, customer satisfaction, and improves collaboration between the members of supply chain. In this study, a single-product bi-level supply chain model with one manufacturer and several retailers under a vendor management inventory system to select retailers under competitive conditions is investigated. In this study, the retailer selection problem formulated as a Stackelberg game model with consideration of manufacturing as a leader and retailers as followers to help the manufacturer and optimally select his retailers to form a VMI system. The manufacturer delivers the products to the selected retailer at the same time. Also, demand for the product in the retailers market is the decreasing function of price. Due to the prevailing policy and the agreement between the manufacturer and the retailer, the manufacturer is also responsible for managing the retailer's inventory. Therefore, the manufacturer will bear all the costs of maintaining the inventory, whether with himself or the retailer. In return, to accept the responsibility of inventory management by the manufacturer, the retailer pays the manufacturer a fee per unit as inventory costs. The objective of the model is to maximize manufacturing profits at the first level and maximize profits of any retailer at the second level. Model decisions are finding the optimal quantities of wholesale price decisions, product's replenishment cycle time, backorder, retailer selection, and determining whether or not to set up a production line for the manufacturer and retail price quantities for the retailer. In order to validate the proposed model, sensitivity analysis was performed on some parameters. As demonstrated by our numerical studies, the optimal retailer selection can increase the manufacturer's profit by 91% and the selected retailer's profits significantly compared to the non-selection strategy.