Evaluating the effects of distribution centres on the performance of vendor-managed inventory systems

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14 Citations (Scopus)


This paper evaluates the effects of the distribution centre (DC) in a vendor-managed inventory (VMI) system comprising one manufacturer, one DC and n retailers. Adopting the order-up-to-level (OUL) replenishment policy, the system aims to maximize the overall system profit. We propose a model to evaluate the system performance by considering the scale of the distribution network, influential cost factors, demand distribution, planning horizon, and facility locations. From the viewpoint of a supply chain, we examine the DC's effects on the system in terms of net profit. Our findings reveal that the DC has effects on demand variance and system profit, and there are some dominant factors that affect the overall system performance. The DC may lead to different system performance under a variety of cost factors, and in some situations, the DC may negatively affect system performance. We also suggest some innovative uses of the DC's location to help enhance system performance.
Original languageEnglish
Pages (from-to)112-122
Number of pages11
JournalEuropean Journal of Operational Research
Issue number1
Publication statusPublished - 16 Feb 2010


  • Distribution centre
  • Location problem
  • Order-up-to-level policy
  • Vendor-managed inventory system

ASJC Scopus subject areas

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


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