Browsing by Subject "Vendor-managed inventory"
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Item Open Access An analysis of manufacturer benefits under vendor-managed systems(Taylor & Francis, 2010) Savaşaneril, S.; Erkip, N.Vendor-Managed Inventory (VMI) has attracted a lot of attention due to its benefits such as fewer stock-outs, higher sales, and lower inventory levels at the retailers. Vendor-Managed Availability (VMA) is an improvement that exploits the advantages beyond VMI. This article analyzes the benefits beyond information sharing and assesses the motivation for the manufacturer (vendor) behind joining such a program. It is shown that such vendor-managed systems provide increased flexibility in manufacturer's operations and may bring additional benefits. An analysis is presented on how the system parameters affect the profitability and determine the conditions that make the vendor-managed system a viable strategy for the manufacturer.Item Open Access Contractual agreements for coordination and vendor-managed delivery under explicit transportation considerations(John Wiley & Sons, 2006) Toptal, A.; Çetinkaya, S.We consider the coordination problem between a vendor and a buyer operating under generalized replenishment costs that include fixed costs as well as stepwise freight costs. We study the stochastic demand, single-period setting where the buyer must decide on the order quantity to satisfy random demand for a single item with a short product life cycle. The full order for the cycle is placed before the cycle begins and no additional orders are accepted by the vendor. Due to the nonrecurring nature of the problem, the vendor's replenishment quantity is determined by the buyer's order quantity. Consequently, by using an appropriate pricing schedule to influence the buyer's ordering behavior, there is an opportunity for the vendor to achieve substantial savings from transportation expenses, which are represented in the generalized replenishment cost function. For the problem of interest, we prove that the vendor's expected profit is not increasing in buyer's order quantity. Therefore, unlike the earlier work in the area, it is not necessarily profitable for the vendor to encourage larger order quantities. Using this nontraditional result, we demonstrate that the concept of economies of scale may or may not work by identifying the cases where the vendor can increase his/her profits either by increasing or decreasing the buyer's order quantity. We prove useful properties of the expected profit functions in the centralized and decentralized models of the problem, and we utilize these properties to develop alternative incentive schemes for win-win solutions. Our analysis allows us to quantify the value of coordination and, hence, to identify additional opportunities for the vendor to improve his/her profits by potentially turning a nonprofitable transaction into a profitable one through the use of an appropriate tariff schedule or a vendor-managed delivery contract. We demonstrate that financial gain associated with these opportunities is truly tangible under a vendor-managed delivery arrangement that potentially improves the centralized solution. Although we take the viewpoint of supply chain coordination and our goal is to provide insights about the effect of transportation considerations on the channel coordination objective and contractual agreements, the paper also contributes to the literature by analyzing and developing efficient approaches for solving the centralized problem with stepwise freight costs in the single-period setting.Item Open Access Quantifying the value of buyer-vendor coordination: analytical and numerical results under different replenishment cost structures(Elsevier, 2008) Toptal, A.; Çetinkaya, S.Despite a growing interest in channel coordination, no detailed analytical or numerical results measuring its impact on system performance have been reported in the literature. Hence, this paper aims to develop analytical and numerical results documenting the system-wide cost improvement rates that are due to coordination. To this end, we revisit the classical buyer-vendor coordination problem introduced by Goyal [S.K. Goyal, An integrated inventory model for a single-supplier single-customer problem. International Journal of Production Research 15 (1976) 107-111] and extended by Toptal et al. [A. Toptal, S. Çetinkaya, C.-Y. Lee, The buyer-vendor coordination problem: modeling inbound and outbound cargo capacity and costs, IIE Transactions on Logistics and Scheduling 35 (2003) 987-1002] to consider generalized replenishment costs under centralized decision making. We analyze (i) how the counterpart centralized and decentralized solutions differ from each other, (ii) under what circumstances their implications are similar, and (iii) the effect of generalized replenishment costs on the system-wide cost improvement rates that are due to coordination. First, considering Goyal's basic setting, we show that the improvement rate depends on cost parameters. We characterize this dependency analytically, develop analytical bounds on the improvement rate, and identify the problem instances in which considerable savings can be achieved through coordination. Next, we analyze Toptal et al.'s [A. Toptal, S. Çetinkaya, C.-Y. Lee, The buyer-vendor coordination problem: modeling inbound and outbound cargo capacity and costs, IIE Transactions on Logistics and Scheduling 35 (2003) 987-1002] extended setting that considers generalized replenishment costs representing inbound and outbound transportation considerations, and we present detailed numerical results quantifying the value of coordination. We report significant improvement rates with and without explicit transportation considerations, and we present numerical evidence which suggests that larger rates are more likely in the former case.