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Benefits of CPFR and VMI Collaboration Strategies in a Variable Demand Environment Western Michigan University ScholarWorks at WMU Dissertations Graduate College 1-2011 Benefits of CPFR and VMI Collaboration Strategies in a Variable Demand Environment Dattaraj Kamalapurkar Western Michigan University Follow this and additional works at: https://scholarworks.wmich.edu/dissertations Part of the Industrial Engineering Commons, and the Mechanical Engineering Commons Recommended Citation Kamalapurkar, Dattaraj, "Benefits of CPFR and VMI Collaboration Strategies in a Variable Demand Environment" (2011). Dissertations. 424. https://scholarworks.wmich.edu/dissertations/424 This Dissertation-Open Access is brought to you for free and open access by the Graduate College at ScholarWorks at WMU. It has been accepted for inclusion in Dissertations by an authorized administrator of ScholarWorks at WMU. For more information, please contact [email protected]. BENEFITS OF CPFR AND VMI COLLABORATION STRATEGIES IN A VARIABLE DEMAND ENVIRONMENT by Dattaraj Kamalapurkar A Dissertation Submitted to the Faculty of The Graduate College in partial fulfillment of the requirements for the Degree of Doctor of Philosophy Department of Industrial and Manufacturing Engineering Advisor: David Lyth, Ph.D. Western Michigan University Kalamazoo, Michigan December 2011 BENEFITS OF CPFR AND VMI COLLABORATION STRATEGIES IN A VARIABLE DEMAND ENVIRONMENT Dattaraj Kamalapurkar, Ph.D. Western Michigan University, 2011 In recent years, practitioners and academic researchers have emphasized that organizations need to collaborate with suppliers and customers to improve their competitive advantage. The availability of cost efficient information technologies like EDI, XML, etc. have made it possible to develop and implement many forms of collaboration strategies. Among them, Vendor Managed Inventory (VMI) and Collaborative Planning, Forecasting and Replenishment (CPFR) are most popular, which are considered for this study. While many studies have identified the benefits of demand information sharing in supply chains; however the benefits gained by implementing collaboration strategies like VMI and CPFR in a variable demand environment are not well established in the literature. This study uses discrete event simulation (Arena software) to develop three different supply chain simulation models (TSC, VMI and CPFR). These models are used to investigate cost benefits of CPFR and VMI over Traditional Supply Chain (TSC) in a variable demand environment. The conceptual model is a two echelon production- inventory system with a manufacturer (plant and warehouse) and a retailer. Periodic review order up-to inventory policy is used to determine order quantity for retailer and production quantity for manufacturer during each period. Manufacturer has capacity constraints and any demand not met during the period is backordered. Similarly, retailer fulfills their demand from available inventory and any demand not met is backordered. Demand variability, production capacity, backorder penalty cost, delivery lead time and supply chain strategy are used as the control variables. Manufacturer cost and retailer cost are used as the performance measures. The outputs from the three simulation models are analyzed using ANOVA and the Pairwise Comparisons method. The results from this study confirm that when compared to TSC, both VMI and CPFR achieve cost reduction for both the manufacturer and the retailer. Also higher cost reduction is achieved in CPFR collaboration strategy compared to VMI for both the manufacturer and the retailer. In addition for both the manufacturer and the retailer, higher cost reductions are achieved in the CPFR strategy when demand variability is high, production capacity is low, backorder penalty cost is high and delivery lead time is high. UMI Number: 3496359 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent on the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. UMI 3496359 Copyright 2012 by ProQuest LLC. All rights reserved. This edition of the work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, MI 48106 - 1346 Copyright by Dattaraj Kamalapurkar 2011 ACKNOWLEDGEMENTS This research would not have been completed without the support, guidance and encouragement from several people. First and foremost, I would like to express my deepest gratitude to my dissertation advisor; Dr. David Lyth for his constant support, guidance, encouragement and many constructive recommendations. His experience and support were an invaluable resource and he was very instrumental in helping me to develop my research skills and my teaching abilities. I have learnt many things from him, including how to stay positive during difficult times and am very thankful for all his help and support with my research, teaching and academic job search. I would also like to express very sincere gratitude for all my committee members; Dr. Greene, Dr. Landeros, Dr. Houshyar and Dr. Butt for their constant support, guidance and many invaluable suggestions. Their experience, knowledge and many constructive suggestions were extremely valuable in completing this dissertation. Next, I would like to specially thank the Department Chair, Dr. Engelmann for his continued support during my doctoral program and also would like to thank all the department staff, specially Klaz and Mary for all their help. I would like to thank many of my friends for their friendship and support during all these years. I would also like to thank my cousin Dr. Arun Kulkarni for his constant support and encouragement during my doctoral program. Finally, I would like to thank my parents, my wonderful wife Seema and my lovely son Rohan for all their love, patience and continued support during all these years. ii Acknowledgements – Continued Seema has been a great source of encouragement and has been very supportive and understanding throughout this process. Without her unconditional love, friendship, support and encouragement, I would not have completed this dissertation. She has been a very understanding and wonderful partner in this journey. My father always encouraged me to pursue my dreams including higher education, and I would like to dedicate this research to the memory of my late father. Dattaraj Kamalapurkar iii TABLE OF CONTENTS ACKNOWLEDGEMENTS .......................................................................................... ii LIST OF TABLES ...................................................................................................... vii LIST OF FIGURES ..................................................................................................... ix INTRODUCTION ........................................................................................................ 1 Introduction .......................................................................................................... 1 Traditional Supply Chain (TSC) .......................................................................... 3 Vendor Managed Inventory (VMI) ...................................................................... 5 Collaborative Planning, Forecasting and Replenishment (CPFR) ....................... 8 Problem Statement ............................................................................................. 11 Research Objectives ........................................................................................... 13 Research Questions ............................................................................................ 15 LITERATURE REVIEW ........................................................................................... 16 Information Sharing in Supply Chains .............................................................. 17 Collaboration Strategies in Supply Chains ........................................................ 29 Gaps in the Literature ........................................................................................ 36 RESEARCH METHODOLOGY................................................................................ 38 Simulation Modeling ......................................................................................... 40 Conceptual Model .............................................................................................. 47 iv Table of Contents - Continued Basic Assumptions ............................................................................................. 48 Model Notations ................................................................................................ 49 Experimental Design .......................................................................................... 50 Independent Variables ....................................................................................... 51 Dependent Variables .......................................................................................... 51 Simulation Model Parameters ............................................................................ 58 Research Hypothesis .......................................................................................... 63 Traditional Supply Chain (TSC) ........................................................................ 67 Sequence of Events in TSC Supply Chain........................................................
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