Channel performance under Vendor Managed Consignment  Inventory Contract with additive stochastic demand

Milena  Bieniek

Channel performance under Vendor Managed Consignment Inventory Contract with additive stochastic demand

Milena Bieniek Maria Curie-Sklodowska University, Plac Marii Curie-Sklodowskiej 5, 20-031 Lublin, Poland. Statistics in Transition new series, vol. 19, 2018, 3, pages: 551-562 Published online: 3 September 2018

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ABSTRACT

Consignment as the shifting of the inventory ownership to a supplier is widely implemented in virtual market. In this form of business arrangement the supplier places goods at a retailer’s location without receiving payment, until the goods are sold. We consider a single period supply chain model, where the supplier contracts with the retailer with some probability of return. Market demand is additive, linearly price– dependent and uncertain. We focus on vendor managed consignment inventory (VMCI) channel, in which the supplier decides the consignment price and his service level and the retailer chooses the retail price. We study channel performance under VMCI setting by analysing how the model parameters influence decision quantities, channel profit and risk function. We also illustrate the obtained results by a numerical example, which explains the overall solutions well.

KEYWORDS

stochastic demand, supply chain, consignment, operations management.

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