VMI Mode Under Revenue Sharing Contract Research

Vendor Managed Inventory (VMI) has attracted a lot of attention from scholarsall over the world in the past20years. Through30years of development in westerndeveloped countries VMI has become a very mature inventory management model,many enterprises in the application process has been successful. since the last centuryChinese introduction of VMI, there have been many successful cases, but thesuccessful implementation of VMI inventory management model, only in afew large enterprises and foreign Large Firm’s Chinese division. In fact, at presentmore and more domestic enterprises are also active attempt VMI model. VMIin China development has great potential. Many successful practice have provedthat vendor managed inventory model is advanced. VMI can solve the problemsof supply chain inventory’s uncertainty risk, to reduce the risk of supply chain, toavoid the information transfer delay and distortion caused by the bullwhipeffect, supply chain enterprises can utilization external resource more reasonable, andimprove customer service level in whole supply chain. But VMI also has someproblems in the concrete implementation process, so VMI need coordination.This paper studies the coordination contract VMI from supply chaininventory cost and benefit perspective. Firstly, analyse the world environmentbackground of this paper, points out the significance of the research, the design trainthought this paper and research content. Then summarized the world’s researchabout VMI inventory model, VMI model contract coordination and system dynamicsin supply chain inventory. Based on summarizing the previous research literatureon the traditional inventory management, VMI inventory management, revenuesharing contract theory and system dynamics. Explained the traditional inventorymanagement problems, and describes the forming process of the bullwhip effect. It ispointed out that the traditional inventory management strategy will be rise the cost of inventory, bullwhip effect, the upstream and downstreamenterprises income imbalance, cooperation and communication problems, provides asolid theoretical basis and theoretical support for the paper.Firstly, construct System dynamics model of vendor managed inventory modeand the traditional supply chain inventory models with different demandfunction, comparative analysis2kinds modes Similarities and differences, theresults prove that, the VMI inventory management model can reduce the bullwhipeffect, reduce the supply chain inventory level, the supply chain can quickly respondto market demand, avoid out of stock risk. Then construct the mathematicalmodel comparative analysis2modes’ profits of each change, analysis shows that:the whole supply chain’s profit has improved after implementation VMI, but becauseVMI seller’s inventory has Transfer to the supplier’s hand, supplier burden the seller ’sreplenishment and inventory cost, caused by the seller ’s profit increasedsignificantly after implementation VMI, and the the supplier’s profit hasdeclined, points out the deficiencies existing in VMI model.Then, design VMI revenue sharing contract model, the model is based on theretailer give supplier some rebate, from the cost and profit of the supply chain’sinspect to analyse the profit change of each member. The results showed thatthe revenue sharing contract in any numerical reasonable interval can bring suppliersand retailers profit increasing in the VMI model. The VMI return model optimizeperformance of the whole supply chain, so that the supply chain achieve theeffective coordination. Retailer give supplier some rebate, effectively solvedthe problem of VMI bring supplier Rights and responsibilities does notconsistent, further proved the feasibility of the VMI.Finally, this paper summarizes the main contents of this paper, points out theshortage of this research, and the next research work. The analysis results ofdifferent supply chain system dynamics model established in this paper, providing atheoretical support for enterprises to Implementation VMI; VMI revenue sharingcontract model can provide theoretical reference in the implementation of VMI. Although there are some hypothetical conditions in the model in thispaper, need to be further tested in practice, but the implementation of VMI inventorymanagement model also can be a reference to the enterprise.