Abstract
The present study discusses the two-stage inventory system within Vendor Managed Inventory and evaluates the effect of hybrid forecasting and replenising strategies towards the supplier’s cost under the plant supply constraint. It is anticipated that the supplier’s cost of stock and outstock at HUB warehouse can be gradually decreased within the fast supply environment. Our concerns fall amongst the supplier’s plant, middle HUB warehouse, and the forecast of the customer’s demand, involving the areas of demand pattern and variation, forecasting method, replenishing strategy, inventory allocation decision, and plant supply constraint. By adopting simulation methodology, we establish a model. Moreover, we attempt to seek a general suggestive conclusion by selecting the best performance for the supplier’s HUB warehouse cost from various strategy combinations along with the multi-factor experimental design. Based on the results, there is indeed a significant difference between the forecasting method and the replenishing strategies. It is advised that the supplier firstly evaluate the forecasting bias between the forecast and demand-supply history offered by customers before adopting the corresponding replenishing strategy. By doing so, it is hoped to benefit the lower- cost circumstance. On one hand, when a plant has limited goods in stock that cannot meet multiple demands, it should strike a balance regarding the constrained stock allocation. The plant is supposed to meet the partial demand of all the downstream HUB warehouses. For instance, by applying the rule of equal stock allocation can overcome the negative impact resulted from the finite stock allocation to the cost. On the other end, the amount of stock allocated in plant should be in harmony with the customer’s demand, which can diminish the Bullwhip Effect caused by the replenishing strategy. Moreover, the allocated amount in plant, whether over or below the standard, would affect the increase of the supplier’s cost. Therefore, the present study offers suggestions about parameters and decisions combination in terms of replenishing strategy, stock from plant supply constraint, and inventory allocation decision for the supplier’s supply and forecasting for customer’s demand end, with a purpose to lower the cost gradually.