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Development of a Markov chain based tool for studying effectiveness of Vendor Managed Inventory and result analysis from a pilot study

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Abstract

Vendor Managed Inventory is looked upon as a reliable method for inventory management. There is still a scope for improving the process. In this work, we presented a report on the pilot setting and its testing for Vendor Managed Inventory in an auto parts manufacturing company in Northern India. The pilot study was conducted by switching supplies of six components of an assembly from conventional to VMI mode. The switch was carried out in January 2018 and a time series plotting of five performance indicators nine months prior to and nine months after the switch was done and analysed. Further, transition probabilities of inventory performance index were estimated based upon the correlations with four most influential performance indicators. Sixteen state switching scenarios were modelled and Markov chain analysis of Inventory Performance Index for two of them was carried out to test the VMI performance.

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Abbreviations

MRP:

Manufacturer resource planning

VMI:

Vendor Managed Inventory

JIT:

Just in time

RM:

Reachability Matrix

IPI:

Inventory Performance Index

MHC:

Materials Handling Cost

COTC:

Cost of the components

LDT:

Lead Time

ISM:

Interpretive Structural Modelling

TQM:

Total Quality Management

BPR:

Business Process Engineering

SPSS:

Statistical Package for Social Sciences

m :

Number of samples

\( P\left( E \right)_{i} \) :

Transition probability of the variable studied

\( P\left( {x_{i} } \right) \) :

Transition probability of each influencing variable

Pss:

Conditional probability of transition from state s to s itself

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Authors and Affiliations

  1. Department of Mathematics, J.C. Bose University of Science and Technology, YMCA, Faridabad, India

    JYOTI & NEETU GUPTA

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  1. JYOTI
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  2. NEETU GUPTA
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JYOTI, GUPTA, N. Development of a Markov chain based tool for studying effectiveness of Vendor Managed Inventory and result analysis from a pilot study. Sādhanā 45, 63 (2020). https://doi.org/10.1007/s12046-020-1298-3

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