Replenishment and dispatch policies with transportation capacity for VMI system

Vendor-managed inventory (VMI) system requires that the vendor is authorized to manage inventories of agreed-upon stock units at retail locations and the shipment process, and when to replenish for the vendor and how to dispatch the stock to the retails in a given area are the important decisions for the vendor. In this paper, we focused on presenting the influences of vendorpsilas limited transportation capacity on replenishment and dispatching policies in vendor-managed inventory systems. Following the classical VMI model from Cetinkaya and Lee, we model the problem with transportation capacity, and numerical simulation method is employed to show the important influence of considering the limited transportation resource of the vendor. The third part logistics(TPL) is proposed to help providing logistic service for the vendor and what standard of selecting the TPL is proposed based on the perspective of long average cost.