Inventory control policies in multi-level supply chains under vendor-managed inventory contracts

Abstract

This dissertation focuses on inventory control problems in supply chains in which a supplier is authorized to manage the inventory levels of retailers by a vendor-managed inventory (VMI) contract. In a VMI system, a supplier determines when and how much to deliver to retailers as well as when and how much to replenish its own inventory from outside vendor by monitoring the inventory levels of the retailers as well as the demand patterns from final customers. We consider three different inventory control problems, and develop algorithms for the problems. First, we consider an integrated inventory replenishment and delivery planning problem in a two-level supply chain consisting of a single supplier and a single retailer. The objective of the problem is to minimize the expected long-run average cost, which is composed of replenishment cost to the supplier, delivery cost to the retailer and inventory holding costs at both members. In the problem considered here, we develop a renewal theoretic optimization model for compound Poisson demands with distribution-free demand quantities, and present an approximation method to determine the order-up-to levels of the supplier and the retailer simultaneously. Secondly, we consider an inventory and transportation planning problem in a two-level supply chain in which a group of retailers located in a geographical area is replenished by a single supplier and deliveries are carried by homogeneous vehicles. In order to determine the replenishment quantities and timing for the retailers as well as the amount of products delivered to the retailers by each vehicle, we develop several heuristic algorithms for the problem with the objective of minimizing the sum of the fixed vehicle cost, retailer-dependent material handling cost and inventory holding cost of the supply chain. Finally, we consider a two-level supply chain consisting of a single supplier and multiple retailers, in which the supplier is composed of a central dist...