Developing EOQ model with instantaneous deteriorating items for a Vendor-Managed Inventory (VMI) system

This paper studies the economic-order-quantity model (EOQ) for deteriorating items in two cases (with and without shortages) to evaluate how vendor managed inventory (VMI) affects supply chain. We consider two-level supply chain (single supplier and a single retailer) with one instantaneous deteriorating item. A numerical example and sensitivity analysis are provided to illustrate the effect of related parameters on total cost and optimal order quantity of two systems. The results show that VMI works better and delivers lower cost in all conditions than traditional supply chain (the system before implementation of VMI).