Hybrid Replenishment and Dispatching Policy with Deteriorating Items for VMI: Analytical Model and OSJCA Approach

This paper focuses on stock replenishment and shipment scheduling with deteriorating item for vendor-managed inventory systems. In consideration that demand process follows a typical Poisson process, hybrid replenishment and dispatching model with correction for VMI is proposed, and a combined solving approach named OSJCA is presented. As approximation of expected dispatching number per replenishment cycle is involved, a varying correction factor in the left half-open interval of (0 , 1] is introduced into the model. Therefore, a series of near-optimal hybrid policies rather than an exactly optimal one, under which average long-run cost is fairly close to the minimum, are obtained by solving a series of programming problems. In order to pick the nearest optimal one out, simuPolicy, a special simulation program for tracking the effect of any hybrid policy for any number of replenishment cycles, is developed in the environment of MATLAB. According to the suggested discriminant rules, the nearest optimal policy can be obtained by comparing results obtained through optimization and simulation one by one. Moreover, a numerical example has shown that the disparity between results from model and simulation under the nearest optimal policy is small or even negligible, thus the validity of our model and approach is confirmed.