Application of the Vendor Managed Inventory (VMI) Model Based on Total Distribution Cost Optimization
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Abstract
This study develops an optimization-based Vendor-Managed Inventory (VMI) model to improve coordination between inventory and transportation decisions in an upstream automotive distribution network in West Java. The problem is formulated as a multi-period Inventory Routing Problem (IRP) and solved using AMPL with CPLEX. The model minimizes total logistics cost, including transportation and inventory holding costs. A benchmark comparison with the company’s existing decentralized replenishment policy is conducted. Results show that the proposed VMI model reduces total monthly logistics cost by 10.66%, from IDR 2.74 billion to IDR 2.44 billion. In addition, service performance improves significantly, with demand fulfilment increasing from 91.3% to 99.2% and stock-out occurrences eliminated. The findings highlight the importance of integrated decision-making in freight distribution systems and provide practical insights for transport capacity planning and inventory positioning.
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This work is licensed under a Creative Commons Attribution 4.0 International License.
Accepted 2026-06-04
Published 2026-06-21
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