Study On Vendor-Managed-Inventory Model With Buyer' Subsidy

Vendor Managed Inventory (VMI) is one of inventory management methods under supply chain management.With VMI, by sharing the information of the supply chain the vendor can manage the inventory of supply chain integrated; that can efficiently decrease Bullwhip Effect which comes from information distortion, and decrease the total inventory cost of supply chain , and then strengthen the supply chain's competition.But the vendor's profit be effected for they have to pay for the buyer inventory cost, thus some measures (such as the buyer giving some cost subsidy to the vendor) should be adopted to enhance the vendor'enthusiasm to implement VMI, which have great meaning to pormote VMI implement abroad.In this paper, the definition,the principle,the working courses,the method to carry out Vendor-Managed-Inventory and etc were introduced; and the literature about the inventory control model of VMI,the profit model of VMI and partial backlogging model was illuminated. Based on former research, gained the conclusion of literatures.Considering the vendor and the buyer sign an agreement: the vendor manage the buyer'inventory and the buyer give an extra subsidy to the vendor. Then a profit model with no backlogging is generated, and numeric examples and sensitivity analysises are present to illustrate the model. The evidence is provided that there exists a reasonable subsidy factor to make the vendor's and the buyer's profits increased in short-term and long-term. Moreover buyer's purchase price would decrease and annual purchase quantity would increase. And it shows that the subsidy factor has a great impact on the their profits while has a little impact on the buyer's purchase price and annual purchase quantity. These situations should be considered when they sign an agreement. Moreover it researches the supply chain's channel profit under VMI in short-term and long-term. The result shows that VMI can increase the profit of supply chain, but it cann't reach the ideal situation under integrated supply chain; and that the subsidy factor has a great impact on the channel profit.Considering of partial backlogging and on the basis of the VMI profit model with buyer's subsidy, new model including a single vendor and a buyer is generated; and the supply strategy with VMI to that without VMI is compared. Numeric examples and sensitivity analysises are present to illustrate the model. The evidence is provided that there exists a reasonable subsidy factor to make the vendor's and the buyer's profits increased, and that each parameter has impact to the profit of each partner and the change of vendor's supply quantity. These situations should be considered when they make the inventory control schedul.