Scale And Time Economies In VMI Hub Operation Model Considering Different Dispatching Policy

As an innovative supply chain operation model, VMI Hub is widely applied in thebusiness practice and wins scholars’ broad attention. It is worthwhile to explore VMIHub’s function mechanism and optimization strategy. The dissertation discusses the scaleand time economies of VMI Hub operation model based different dispatching policies.When time-based dispatching policy is employed, the scale and time economies ofVMI Hub operation model are not obvious all the time. If the system is sensitive to theorder waiting cost, the system will operate as “one piece came, one piece delivered”. Inthis situation, both the economies of scale and the economies of time of VMI Hub areabsent. Otherwise, the scale economies and time economies of VMI Hub are obvious.VMI Hub can serve the downward delivery with a lower cost and high frequency.Meanwhile, under time-based dispatching policy, the replenishment decision process isindependent of dispatching decision process, namely the decision variables for the twoprocess are independent. Under the quantity-based dispatching policy, the scale and timeeconomies of VMI Hub operation model are obvious at most times, because both kinds ofeconomies are not affected by the sensitivity of the order waiting cost. VMI Hub canalways serve the downward delivery with a lower cost but a high frequency. Comparedwith the time-based dispatching policy, the delivery decision process is related to thereplenishment decision process. The latter process vibrates the scale and time economiesof VMI Hub operation model in the former decision stage. In general, the larger thesystem scope is(the higher the system cost is), the more obvious of VMI Hub’s scale andtime economies are when compared with traditional decentralized VMI. The reason liesthat the VMI Hub operation model is more stable to the factors of cost increasing.