Optimization of quantity-based dispatching policy in a vendor managed inventory (VMI) environment

Abstract

We describe a new inventory cost control model to avoid disadvantage of the traditional inventory control model, based on consignment amounts and the vendor managed inventory (VMI) model. By means of decomposition of the inventory cost, we derived an integrated expression of cost, then solved the expression by means of optimization, and finally obtained the optimized consignment amount, the optimized consignment time and the optimized operating cost. The results obtained can help companies achieve economies of scale, lower their costs and ultimately enhance their competitiveness.