Vendor managed inventory (VMI) with consignment considering learning and forgetting effects

The paper considers two research issues that usually interact in practice, which are the ‘VMI with consignment’ inventory policy and the ‘Learning Curve’. Under a VMI with consignment agreement, the vendor is the one who manages the buyer's inventory, and he holds the property of the inventory until the withdrawal of the buyer: this practice also offers to the vendor the possibility of revising its production plans and shipments according to alternative policy also exploiting the opportunity offered by learning in production. The paper, which considers a two‐level supply chain system with a single‐vendor and a single‐buyer at each level, investigates and compares different policies that the vendor may adopt to exploit the advantages offered by the VMI with consignment agreement when the vendor's production process is subject to learning effects. The main result of the study is to show how learning in production can give flexibility to the supply chain stake holders in assigning the size and the time of each shipment.