The impact of supply lead-time on the value of Vendor Managed Inventory in an auto-correlated demand environment

Abstract

The value of Vendor Managed Inventory has been widely analyzed in the literature, for different supply chain characteristics, in particular, for various demand patterns, and by different modeling approaches. In this paper, we are interested in customer demand following an AR(1) process. We investigate the impact of lead-time variation on the value of the Vendor Managed Inventory in a two-echelon supply chain, where performance is measured in terms of inventory reductions. A correlation analysis is lead to evaluate the magnitude of the interaction between the manufacturer lead-time and benefits from Vendor Managed Inventory. Managerial guidelines are deduced, and opportunities for future research are proposed.