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An Investigation of the Impact of Two VMI Variants on Supply Chain Performance

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한국기업경영학회 (Korean Corporation Management Association)|2012.08|기업경영연구 (Korean Corporation Management Review)|제19권 제4호|pp. 1-26|DOI http://dx.doi.org/

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참고문헌

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정보공유공급망 협력재고관리Inventory ManagementSupply Chain CollaborationInformation SharingVendor-Managed InventorySimulation Model시뮬레이션 모델공급자에 의해 관리되는 재고(Vendor Managed Inventory)
주제분류경영학

초록

The Vendor-Managed Inventory (VMI), as the one program for the supply chain collaboration, has been paid heavy attentions from both industry practitioners and academic researchers in these days. While the majority of the past studies supports the superiority of VMI over the traditional non-VMI supply chain system, each of them takes a different approach to define his own VMI system from the others.’ The main goal of this study is to examine the impact of VMI on the performance of the supply chain system. Based on the literature review on the previous studies, this study recognizes two distinct types of VMI depending on who pays the cost for the inventories at the buyer’s warehouse. Under the first type of VMI (VMI I), the supplier pays the whole costs for buyer’s inventories, and, under the second type of VMI (VMI Ⅱ), the supplier does not pay these costs. This study intends to find out whether the difference in cost payment may affect the impact of VMI on the supply chain performance. In this study, the supply chain collaboration system is analyzed in three perspectives, which are the decision authority, cost payment, and information sharing. The certain supply chain program is considered to be more advanced coordination mechanism, as one party or the coordinated union of most parties has the authority to make more decisions, holds the responsibility to pay more cost items, and obtain more information in the supply chain system. According to this concept, this study assumes that VMI I is more advanced collaboration program than VMI Ⅱ, and evaluates their performances along with the traditional system. In order to conduct the sophisticated analyses, this study applies simulation modeling based on the time-phased operations. A two-stage supply chain system, with a single buyer and a supplier, is considered in the simulation and it incorporates multiple steps of the operations including forecasting, replenishment, inventory management, production, and transportation. Both buyer and supplier make proper decisions on their own operations to maximize profits. Buyer’s and supplier’s operations are determined by their interactions that are characterized by a specific collaboration form (either traditional system, VMI I, or VMI Ⅱ). In the simulation model, the buyer’s operations are composed of (1) market demand forecasting, (2) replenishment planning,and (3) inventory management. The supplier, who is also a manufacturer, processes operations including (1) order forecasting, (2) production (including capacity management), (3) inventory management, and (4) transportation. The profit maximization is achieved by making the optimal decisions on the operations based on the available information. Both the range of authority and the specific information allowed to the decision maker are determined by the particular collaboration form of the supply chain system. Depending on the collaboration form installed in the supply chain system, different decision authority and particular information are given to only the buyer, only the supplier, or both of them. The simulation model considers six operational and environmental factors: coordination mechanism, information sharing, demand pattern, lead time, production capacity, and cost structure. The performance of each supply chain system is evaluated in terms of service levels, bullwhip effect, and profits. The simulation outcomes generally support the widely held view that more advanced collaboration programs have greater supply chain profit than less advanced ones. VMI I also results in good performances in terms of supplier’s service level (fill rate) and bullwhip effect. When the supply chain systems are evaluated in terms other than total profit, however, the simulation outcomes do not support that more advanced collaboration systems always lead to better performance. This result implies that the practitioner should maintain caution when selecting a particular supply chain collaboration system, and alert to the issue of what precisely needs to be improved in the current system. The simulation outcomes also show that the supply chain profit significantly increases as a result of information sharing. Furthermore, information sharing can enable the less advanced collaboration system to outperform the more advanced one. By implication, Information sharing is not simply an accessory to the coordination mechanism, but it is rather an essential element vital to the beneficial operation of the coordination mechanism. Further properties of coordination mechanisms are analyzed and discussed

Abstract

The Vendor-Managed Inventory (VMI), as the one program for the supply chain collaboration, has been paid heavy attentions from both industry practitioners and academic researchers in these days. While the majority of the past studies supports the superiority of VMI over the traditional non-VMI supply chain system, each of them takes a different approach to define his own VMI system from the others.’ The main goal of this study is to examine the impact of VMI on the performance of the supply chain system. Based on the literature review on the previous studies, this study recognizes two distinct types of VMI depending on who pays the cost for the inventories at the buyer’s warehouse. Under the first type of VMI (VMI I), the supplier pays the whole costs for buyer’s inventories, and, under the second type of VMI (VMI Ⅱ), the supplier does not pay these costs. This study intends to find out whether the difference in cost payment may affect the impact of VMI on the supply chain performance. In this study, the supply chain collaboration system is analyzed in three perspectives, which are the decision authority, cost payment, and information sharing. The certain supply chain program is considered to be more advanced coordination mechanism, as one party or the coordinated union of most parties has the authority to make more decisions, holds the responsibility to pay more cost items, and obtain more information in the supply chain system. According to this concept, this study assumes that VMI I is more advanced collaboration program than VMI Ⅱ, and evaluates their performances along with the traditional system. In order to conduct the sophisticated analyses, this study applies simulation modeling based on the time-phased operations. A two-stage supply chain system, with a single buyer and a supplier, is considered in the simulation and it incorporates multiple steps of the operations including forecasting, replenishment, inventory management, production, and transportation. Both buyer and supplier make proper decisions on their own operations to maximize profits. Buyer’s and supplier’s operations are determined by their interactions that are characterized by a specific collaboration form (either traditional system, VMI I, or VMI Ⅱ). In the simulation model, the buyer’s operations are composed of (1) market demand forecasting, (2) replenishment planning,and (3) inventory management. The supplier, who is also a manufacturer, processes operations including (1) order forecasting, (2) production (including capacity management), (3) inventory management, and (4) transportation. The profit maximization is achieved by making the optimal decisions on the operations based on the available information. Both the range of authority and the specific information allowed to the decision maker are determined by the particular collaboration form of the supply chain system. Depending on the collaboration form installed in the supply chain system, different decision authority and particular information are given to only the buyer, only the supplier, or both of them. The simulation model considers six operational and environmental factors: coordination mechanism, information sharing, demand pattern, lead time, production capacity, and cost structure. The performance of each supply chain system is evaluated in terms of service levels, bullwhip effect, and profits. The simulation outcomes generally support the widely held view that more advanced collaboration programs have greater supply chain profit than less advanced ones. VMI I also results in good performances in terms of supplier’s service level (fill rate) and bullwhip effect. When the supply chain systems are evaluated in terms other than total profit, however, the simulation outcomes do not support that more advanced collaboration systems always lead to better performance. This result implies that the practitioner should maintain caution when selecting a particular supply chain collaboration system, and alert to the issue of what precisely needs to be improved in the current system. The simulation outcomes also show that the supply chain profit significantly increases as a result of information sharing. Furthermore, information sharing can enable the less advanced collaboration system to outperform the more advanced one. By implication, Information sharing is not simply an accessory to the coordination mechanism, but it is rather an essential element vital to the beneficial operation of the coordination mechanism. Further properties of coordination mechanisms are analyzed and discussed

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