A Dynamic (s, S) Replenishment Policy for Suppliers Engaged in VMI Agreement with Retailers

Abstract

Using a rule-based decision making approach, this paper proposes a dynamic (s, S) replenishment policy for suppliers who practice VMI with their retailer customer. The relationship between the supplier overall cost and replenishment decision variables are explored through Monte Carlo simulation coupled with sensitivity analysis. The advantage of the proposed dynamic (s, S) policy is demonstrated through parallel comparison of different replenishment policy schemes. The paper discusses the application of dynamic (s, S) replenishment policy in the scenario of perishable goods and in the scenario of supply chain process with long lead time.