Now consider the case where the supplier and
buyer have agreed to use VMI. The consequence is
that the supplier has full knowledge of demand and is
responsible for managing the inventory for both
parties. In a serial supply chain, the order quantity
for the supplier is likely to be an integer multiple of
the buyer’s replenishment quantity (Q=k
VMIq, where
k
VMI is a positive integer) [23]. In other words, k
VMI
may be viewed as the replenishment frequency between the supplier and the buyer. Hence, the objective
is to find the optimal order quantities (Q and q) a