Transaction Cost Analysis. Under Vmi Mode Of Operation

With the rapid develop of information technology, the trends of global economic intregration are becoming clear.The traditional economic model is no longer compatible with the development of times. The development of Economic Globalization requires the company to establish mutual cooperation relations with its upstream and downstream companies. Because of these changes, the traditional inventory management models become outdated. The new inventory management mode-VMI (Vendor Managed Inventory)comes into being.VMI will help weaken the bullwhip effect of the supply chain, promote trust and cooperation between enterprises, reduce inventory costs of the total supply chain, improve service levels, increase customer satisfaction. In a word, it will help the supplier and distributor achieve win-win results.This paper analyses the VMI operation model from the perspective of transaction costs.Based on the relative theories, it puts forward the factors of transaction costs in VMI model. From the human perspective, it includes bounded rationality and opportunism; from the transaction perspective, it has three aspects. They are uncertainty, transaction frequency and asset specificity; from the VMI model perspective, it takes game,information sharing and profit sharing mechanism into account.This paper adopts qualitative and quantitative analysis methods. From the point of view of qualitative, it analyses the influence of uncertainty, transaction frequency and asset specificity in VMI model. Due to reducing exogenous and endogenous uncertainty, transaction costs will be reduced. The transaction frequency will reduce,it will help to reduce transaction costs. It asks the supplier and distributor to invest certain specific assets to participate in VMI model; these specific assets help to reduce the transaction cost of the both sides.It uses game theory to analyze bounded rationality behavior and opportunism. For the needs of long-term cooperation, both sides will choose trust and information sharing strategies. It will reduce transaction costs in the long run. Moreover,it divides the transaction costs reducing process into four stages: initial contact stage, mutual understanding stage, mutual trust stage and strategic alliances stage.This paper analyses information sharing factor and profit-sharing mechanism factor in VMI model. Through the model and numerical analysis, it finds out information sharing will help reduce transaction costs. Through comparing the profit changes between implementation of VMI and un-implementation of VMI, it finds the long-term implementation of VMI not only will increase the whole chain's profit, but also will increase profits of each side. At the same time, the transaction costs are reduced.