Optimal strategy of the supply chain with single-supplier multi-retailer under retailer- or vendor-managed inventory

The coordination of operational strategies among members of the supply chain is essential to the smooth running of the multi-echelon distribution system, whose common mechanisms include retailer-managed inventory (RMI) and vendor-managed inventory (VMI) policies. Meantime, the wide implementation of distribution center (DC) adds to the difficulty of maintaining the flexibility for the integrated inventory system. Therefore, this paper intentionally takes advantage of RMI and VMI policy to reconsider the decision process of the supply chain with single-supplier multi-retailer incorporating the location of a single DC. The retailers are assumed to adopt the common cycle to synthesize their ordering policies, and then the average cost functions including the supplier, the retailers and the supply chain are developed, respectively. Under the cooperative setting, the optimal operational strategies of RMI and VMI policies can be obtained while the solution of the integrated production-inventory policy is served as the comparison. In view of the application, numerical examples and sensitivity analyses are provided. And it can be found that the optimal location of the DC relies on which member plays the dominant role in the supply chain.