Research On Vendor Managed Inventory Systems Constructed By The Third Party Logistics

As increasing demand for value-added logistics services, it has become more and more profitable for the TPL (Third Party Logistics) to provide professional, specific and systematic supply chain solutions to the clients. VMI (Vendor Managed Inventory) is a popular and representative supply chain management strategy. After successful practice in some companies such as Procter & Gamble and Wal-Mart, many clients adopt VMI strategy for their supply chains with the help from their TPL partners. Not only is TPL beneficial to the VMI system with cost efficiency and resource integration, but also it provides the clients with personal and specific VMI supply chain solutions. Based on this, this paper analyzes the TPL's effect on the VMI system, provides a framework for the TPL companies during the implementation of VMI solution for the associated clients.We firstly analyze the effect of TPL on the VMI supply chain. We set up a mathematical model with vendors, TPL and retailers by means of EOQ (Economic Order Quantity) inventory policy. We compare the profit components with respect to the VMI system with and without TPL, and also demonstrate that TPL increases the VMI system's efficiency. Then, we analyze the effect of TPL on the system by integration logistics operations, which leads to that TPL decreases the VMI system's logistics cost. We further discuss how to design a personal and specific VMI solution for the clients. Two VMI process structures are provided. They are the most popular in practices, including Vendor-Manufacturer VMI and Vendor-Retailer VMI. We summarize a framework for the implementation of VMI strategy. We illustrate several of key factors for TPL's success in a VMI supply chain.