A Study On Integrated Production-Inventory-Distribution Optimization Of Company A Based On VMI

Vendor Managed Inventory (VMI) is a new inventory management strategy that upstream-downstream enterprises through the transfer of inventory management responsibilities to realize the supply chain performance optimization. In general, VMI can bring higher returns to the downstream customers, but for the upstream supplier is uncertain. And scholars in the field of study is to simplify the problem, and mostly study the VMI in supplier-retailers that don’t consider purchasing lead time and production. Against this background, the study that the upstream manufacturer’s integrated production-inventory-distribution optimization to reduce its total cost and get the benefits of the VMI, has important theoretical and practical significance.This paper choose Company A as the study subject, after the introduction of the Company A and its MTO policies, the writer analysis A’s background of VMI strategy—he problems in the MTO policies, and proposes A’s VMI operating method. Based on this, the integrated optimization model with considering multi-product and multi-period is built by using the mixed-integer linear programming method to simultaneously optimize A’purchase, production and distribution process. At last, we introduce A’s argument and data to validate the model, and also compare the total cost with the MTO policies and analyse the influence of argument changement and projection bias on the integrated optimization model.The results suggest that the company A integrated optimize under VMI strategy can effectively reduce the total costs of the supply chain, but for A, it’s cost saving is less than B’s. Thus, a interest distribution mechanism must be developed to improve the enthusiasm of A to implement VMI strategy. In addition, to promote ability of the production lines will help A to reduce its total cost with the increase of demand, sharing the cost in each product does not necessarily reduce. The more schedule variance, the more total cost. And the higher service level, the lower total cost.