The impacts of vendor-managed inventory on supply chain performance in the retail industry

With the quick development in information technology, many retailers have adopted vendor-managed inventory (VMI) to improve their operations. This study examines the impacts of VMI on the supply chain performance from three distinct perspectives. In the following, we provide a brief description of specific problems considered in this study.;Consignment is a popular form of business arrangement where suppliers retain ownership of the inventory and get paid from retailers based on actual units sold. Chapter 2 addresses the delegation of inventory decision-making operated under the consignment arrangement by comparing two business practices, VMI vs. retailer-managed inventory (RMI). We show that the VMI in which the upstream supplier is delegated the inventory decision is beneficial to the entire supply chain operating under consignment arrangement.;In Chapter 3, we study a particular contract designed by Amazon.com, which operates under the consignment and VMI arrangements. A key parameter in the contract is the product list price that Amazon.com allows a supplier to choose. Amazon.com then sets the retail price at or below supplier's list price for selling the product to the market, and remits the supplier an amount equal to a pre-specified percentage of the list price on each unit sold. To address the effects of the product list price on the entire supply chain, we show that supplier's list price acting as a constraint on retailer's retail price in the contract plays a major role in determining firms' decision and performance in equilibrium. In particular, by committing its retail price not to exceed supplier's list price, the retailer can improve its own profitability without hurting the supplier.;The extant literature holds conflicting views on the benefits of VMI to retailers. In Chapter 4, we reconcile the seemingly conflicting results in the current literature by noting that their differences are the results of different assumptions on unmet customer demand, which is affected by customers' store loyalty. Further, we demonstrate that a retailer with a high customer loyalty benefits from VMI for a wider range of wholesale prices than a retailer with a low customer loyalty.