Research On The VMI Of Supply Chain Based On System Dynamics

Vendor manage inventory (VMI) is one kind of supply chain management practice. Thevendor's responsibility is to monitor and to management the buyer's inventory on the basis ofanticipated demand and the maximum and minimum stock levels reached in advance. The paperapplies the theory and methodology of System Dynamics to simulate VMI from the point ofsystematic and dynamic strategy. The system dynamics model of single producer, supplier anddistributor was built by VENSIM5.0 simulation software. Tests on the model prove itseffectiveness and reliability. In the simulation stage, the performances of model are analyzed onaccount of different demand. The result proves VMI stock strategy is better than traditional stockstrategy.The paper firstly discusses the feasibility and advantages of applying system dynamics tostudy supply chain. According to the point, the paper states researching content and frame.Then analyze domestic and foreign research results; The second is theoretical basis consists ofsystem dynamics' principles, modeling approach and supply chain inventory management. Itstates principles and characters of VMI. The third stage is modeling and testing. It contains threeaspects working. 1) studying the constitution of VMI supply chain system and proposing the VMIsuppliers' assessing methods. 2) Base on the system boundary, constructing the VMI systemsimulation model using the Vensim5.0 simulation software. Carrying on the analysis to thesystem internal cause and effect feedback loops. And designing in the system flow chart eachsub-module operating procedures.3) Carrying on the structure testing and sensitivity testing tothe system model. Through corresponding variable value adjustment and variable reciprocity,system model validity is certificated. The last is under the different demand conditions the VMIstock strategy simulation analysis stage. Through adjusting demand input, simulating andanalyzing system behaviors under different conditions. Mainly three state variables and a speedvariable are selected (WIP Inventory, Vendor Inventory, Distributor Inventory and DistributorShipment Rate) as main target values. And obtaining simulation results compare with behaviorperformances under the traditional stock strategy. VMI simulation results surpass the results oftraditional stock strategy obviously. Simultaneously the validity of system dynamics modeling isproved.