A VMI model and its performance in supplier-driven supply chain

This paper aims to analyze the effects of VMI on supply chain performance and announce the important function of VMI in promoting supply chain coordination, reducing costs and increasing profit. This research builds a VMI inventory decision model of supplier-driver supply chain. According to this model, VMI is found always to reduce the system´s(buyer and supplier together) and the buyer´s inventory related costs in the short-term, but the supplier´s inventory related costs varies. Under certain cost conditions between buyer and supplier, VMI can increase the system´s and the buyer´s profit. And the supplier´s profit can be increased under other conditions.