A Bi-objective Optimization for Vendor Managed Inventory Model

Abstract

Vendor managed inventory is a continuous replenishment program that is designed to provide major cost saving benefits for both vendors and retailers. Previous research on this area mainly included single objective optimization models where the objective is to minimize the total supply chain costs or to maximize the total supply chain benefits. This paper presents a bi-objective mathematical model for single-manufacture multi-retailer with multi-product in order to maximize their benefits. It is assumed that demand is a decreasing and convex function of the retail price. In this paper, common replenishment cycle is considered for the manufacturer and its retailers. Then, the proposed model converts to the single-objective optimization problem using a weighted sum method. A genetic algorithm (GA) is applied to solve it and response surface methodology is employed to tune the GA parameters. Finally, several numerical examples are investigated to demonstrate the applicability of the proposed model and solution approach.