Vendor-managed inventory in practice: understanding and mitigating the impact of supplier heterogeneity

Vendor managed inventory (VMI) agreements are a supply chain collaboration principle in which the supplier is responsible for keeping at buyer between given lower and upper limits. VMI gives lot of autonomy while making replenishments, allowing to efficiently ensure availability buyer. But different suppliers may apply approaches staying limits under VMI. Relatedly, objectives not completely aligned with those We develop methodology setting appropriate limits, taking into account heterogeneity base. To this end, by distinguishing various possible strategic within we arrive four types. classifying one these types based on historic trajectories argue how set tailored each type. A case study approach large high-tech manufacturer reveals that accurately identifies type 47 manufacturer. Moreover, simulation company data shows tailoring suppliers' lead cost reduction 4–6% without reducing service level, as compared benchmark method does take