An Extended Analysis of Consignment Stock Policy in the Presence of Product Obsolescence

Consignment stock (CS) is a special case of vendor managed inventory (VMI). The present literature on CS model has focused on the one-vendor, one-buyer system with or without the presence of product obsolescence. This paper extends the present works from two aspects. One is to change the system to one-vendor and two-buyer. The overlapped effects of the CS mechanism and different transportation policies are analyzed. Results demonstrate that system costs with different transportation policies depend on the demand, cost parameters and production policies. A numerical method to compare system costs is given. Another is to change the product lifetime from determinate to indeterminate. The several production and transportation policies under this setting are analyzed. Results show that high production flexibility and keeping outdated products in the vendor´s site could lead to lower system costs.