Benefits of vendor managed inventory programs in two-stage supply chains

Abstract

This paper investigates potential benefits of an Information Sharing (IS) scenario in a two-stage supply chain where demand for an item is generated by the AR(1) process and inventory replacements are made according to an order-up-to level (OUT) policy. To quantify such benefits, the changes in the bullwhip ratio and the average on-hand inventory level are calculated. The analysis reveals that the choice of IS scenario depends simultaneously on three factors: (a) autocorrelation level, (b) relative length of lead times, (c) the size of probability for each member to face lead time demand at most equal to his OUT level. Copyright © ICIL, Beer-Sheva, Israel 2018.