An analytical study of the modification ability of distribution centers

Qiu Hong Zhao, Edwin Tai Chiu Cheng

Research output: Journal article publicationJournal articleAcademic researchpeer-review

22 Citations (Scopus)


This paper considers a two-level vendor managed inventory (VMI) system comprising a distribution center (DC) and a retailer. Both the DC's and the retailer's replenishment decisions follow the order-up-to-level policy and aim at maximizing the profit of the overall system. We critically examine the potential of the DC's ability to modify delivery decisions, identify and quantify the cost factors that influence the DC's modification ability, establish a relationship between the DC's location and its modification ability, and show the trade-off between the DC's modification ability and related costs. Our analysis provides a new insight into the role of the DC and reveals the full potential of the VMI system. Our findings and their practical implications, demonstrated with the aid of computational examples, are helpful for enhancing the practice of VMI at both strategic and operational levels.
Original languageEnglish
Pages (from-to)901-910
Number of pages10
JournalEuropean Journal of Operational Research
Issue number3
Publication statusPublished - 1 May 2009


  • Distribution center
  • Location
  • Modification ability
  • Order-up-to-level policy
  • Vendor managed inventory system

ASJC Scopus subject areas

  • Management Science and Operations Research
  • Modelling and Simulation
  • Information Systems and Management

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