Therefore, in order to minimize total inventory cost
in the integrated VMI system, the supplier will be
ordering each
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2CR
H
q
time it places an order from its
We can further describe the properties of the optimal
replenishment frequency with VMI, and its relationship
to the optimal replenishment frequency
without VMI, using the following proposition. Assume
d is the ratio of the supplier’s carrying charge
to the buyer’s (d =H/h), g is the ratio of the supplier’s
ordering cost to the buyer’s without VMI ( g =C/c),
and gVis the ratio of the supplier’s ordering cost to the
buyer’s with VMI ( gV=C/cV).