Article ID: | iaor20041925 |
Country: | United Kingdom |
Volume: | 39 |
Issue: | 5 |
Start Page Number: | 363 |
End Page Number: | 380 |
Publication Date: | Sep 2003 |
Journal: | Transportation Research. Part E, Logistics and Transportation Review |
Authors: | Disney S.M., Potter A.T., Gardner B.M. |
Keywords: | transportation: road |
This paper investigates the impact of a vendor managed inventory (VMI) strategy upon transportation operations in a supply chain. Specifically, the issue of batching to enable better use of transport vehicles is studied. A system dynamics methodology is used to develop difference equation models of three scenarios – traditional, internal consolidation and VMI. The holistic nature of inventory management within VMI enables batching to minimise transport demand without negatively impacting the overall dynamic performance of the supply chain. Using the concept of cost escapability, it is shown that transport cost savings are possible in both the short and long term.