Inventory Control and

Management Models:
Vendor Managed Inventory
Alper Sarcolu
2017
 Published Items in Each
Year

441
published articles
 Concerns
Causality of factors
Adoption Rate and By-products
Asymmetrical Advantages of parties
VMI implementation in production and inventory control
Transport Operations
Information Sharing Challenges
the Bullwhip Effect
Which Information is the most valuable
How Environmental factors affect VMI?
Is VMI more beneficial under high demand volatility?
Level of Integration: Ownership
Exploiting areas of VMI
Advanced Marketing Research
survey suggests that an
average 53% inventory reduction,
30-50% lead-time improvement, and
retail in-stock improvement of 23%
observed among VMI practitioners.
 Expected Benefits
Increased reduction and transportation utilization efficiency.
Improved service levels in terms of material availability.
Increased inventory turnover rate and due to shorter lead times.
Fewer inventory stock-outs due to increasing inventory visibility.
Reduced safety stocks due to increased visibility.
Reduced bullwhip effect due to increased visibility and control
between partners.
Higher selling space productivity obtained by optimizing inventory,
Increased customer loyalty and reduced costs due to collaborative
operations using better information.
Increased information technology infrastructure.
 Causality of factors
Waller and Johnson (1999):

Why these benefits have

resulted from VMI?

More frequent inventory

monitoring and optimizing
shipment quantities.

The approach greatly reduces

inventories for all participants in
the arrangement, without
compromising service.
 Adoption Rate and By-
products
Bringing customers into the VMI program improves
the supply chain for customers who have not
adopted the approach thanks to production
smoothing.
Asymmetrical Advantages of
parties
The advantages to the buyers side are
straightforward

In terms of information sharing, VMI helps most the

upstream parties rather their downstream partners.

Dong and Xu (2002):

VMI always reduces inventory cost and yields

higher buyers profit where suppliers profit
depends to buyers performance.
 VMI implementation in
production and inventory control
How the number of VMI customers affects the
manufacturers production efficiency when manufacturer
serves to both VMI and non-VMI customers with different
planning and production cycles?

Smaros et al. (2003):

The value of visibility greatly depends on the target

products replenishment frequencies and the
production planning cycle employed by the
manufacturer.
 Transport Operations
What is the potential positive
impact of VMI upon
transportation operations?

Disney et al. (2003):

VMI scenario using fewer

vehicles than the traditional
supply chain, with higher
fleet utilization and produces
the lowest cost solution with
respect to transport costs.
Which Information is the
most valuable

What kind of information is most valuable

for a VMI implementation?

Vigtil (2007):

Current inventory status and sales

forecasts.
 Information Sharing
Challenges

What happens data is inaccurate and

late?

Angulo et al. (2004):

Overall information delay affected a

large number of measures of
performance, whereas, information
accuracy did not.
 the Bullwhip Effect

How VMI reduces bullwhip effect?

Kaipa et al. (2006):

VMI reduces the bullwhip effect

since it can totally eliminate
Burbidge and Houlian.
 How Environmental factors
affect VMI?
What are the promising or hostile environments to
implement VMI?

Dong et al. (2007):

Buyers Market Competitiveness
Suppliers Market Competitiveness
Product Demand Uncertainty
Buyer Operational Uncertainty
BuyerSupplier Cooperation
Is VMI more beneficial under
high demand volatility?
Why contributors evaluated impact of demand volatility over
VMI different and what are the structural assumptions behind
these differences?

Sar (2007):
Information sharing is more beneficial at higher levels of
demand uncertainty as long as the type of information
includes crucial aspects to support decision making of
upstream parties.

VMI provides nearly the same level of performance

increase as long as the ratio of the retailers lead time to
that of the suppliers remains constant.
 Level of Integration:
Ownership
Who should be the owner
of inventory?

Pohlen et al. (2003):

Who has the interest in

keeping inventory
volumes down.
Lesser Forms of VMI: IS and
CRP
What are the differences in benefits of IS, CRP, and
VMI?

Yao et al. (2008):

VMI and CRP has more significant effect on

inventory reductions for both the manufacturer
and the retailer than IS.
Thank you!