Vendor managed inventory models under contractual agreement (Q1753746)

Summary: The purpose of this paper is to explicitly include a contract between the vendor and retailer in a two-layer supply chain under VMI initiative. Two models are developed, one for a decentralised supply chain where the vendor and retailer determine their operating policies independently. The other model, however, is for centralised supply chain under VMI contract. The saving realised by implementing VMI initiative is distributed between vendor and retailer according to some weight such that no party incurs more cost than that generated by the decentralised supply chain. Also, solution procedures are devised based on Kuhn-Tucker conditions.