A SWMR Algorithm Approach for the Vendor Managed Inventory Problem when Static Demand Rates

Abstract

In a two-phase supply chain with Vendor Managed Inventory (VMI) policies, the supplier takes on the duty of keeping its retailers' inventory up to date and making sure they never run out of stock. This is in addition to his inbound inventory. This study aims to combine the retailers in various set partitions or to maximize their distribution and inventory holding costs within the same set partition. This paper focuses on a two-stage supply chain made of a single warehouse and multiple retailers (SWMR) facing a static demand and implementing VMI. We proposed a model for coordinating the system with a two-phase solution method. The first phase is to minimize the overall inventory costs and, in the second phase, a constructive vehicle routing problem (VRP) heuristic is used to optimize the distribution costs by satisfying some additional restrictions. Results of this implementation of VMI in an illustrative supply chain case are shown and discussed in detail.