Hybrid algorithm for a vendor managed inventory system in a two-echelon supply chain

In this paper we address the issue of vendor managed inventory (VMI) by considering a two‐echelon single vendor/multiple buyer supply chain network. We try to find the optimal sales quantity by maximizing profit, given as a nonlinear and non‐convex objective function. For such complicated combinatorial optimization problems, exact algorithms and optimization commercial software such as LINGO are inefficient, especially on practical‐size problems. In this paper we develop a hybrid genetic/simulated annealing algorithm to deal with this nonlinear problem. Our results demonstrate that the proposed hybrid algorithm outperforms previous methodologies and achieves more robust solutions.