Improving cost efficiency of gasoline distribution through vendor-managed inventory technique

Abstract

Supply Chain Management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Nowadays Supply chain collaboration has been introduced in order to react to actual customer orders, to reduce waste in the Supply chain, but also increases market responsiveness, customer orders, to reduce waste in the Supply chain, but also increases market responsiveness, customer satisfactions and competitiveness. Many pattern of Supply Chain Collaboration has been developed and widely implemented in many industries and mostly implemented is Vendor Managed Inventory or VMI. Further more, inventory control system play a significant role in managing the supply chain. Therefore, this study has introduced three inventory models under information sharing between central depot and service station as a vendor managed inventory concept in order to determine optimal replenishment and efficiency in two echelon supply chain. Performance metric included sales volumes and profit margin has been adopted to determine the situation and potential of each service station. The result of the study indicates that the appropriate inventory model with information sharing would generate more utilities to the supply chain compare to the existing inventory system such as inventory cost reduction and customer satisfaction. In addition, cluster analysis has been adopted to classify each services station to four subgroups in order to make more understanding of service station potential or critical point.