On competence of vendor managed inventory in supply chains using basic mathematical inventory models

In this study, a two-echelon single-vendor supply chain is selected to do a cost-based comparison between short-term performances of a vendor managed inventory (vmi) and a retailer managed inventory (rmi). while the inventory costs include ordering and storing expenses, the rate of consumption and the price of goods are constant, the rate of production and pace of transportation are infinite and shortage is not allowed. this paper, after a comprehensive literature review, is followed by three cases of single retailer, n-retailer and two-retailer chains. unlike the second case, in the first case, vmi shows an absolute superiority to rmi, and this is the reason for devising the third case in which a deeper analysis, including a typical performance assessment system for two-retailer chains is undertaken. the third case reveals that, although vmi is not always the better choice, under most conditions, it can be chosen as the better approach.