This paper deals with the flow of information and material throughout a four-level fast moving consumer goods (FMCG) supply-chain. We propose that, under certain circumstances, the coordination of information and material fl ows along the supply chain should be done by the distributor, in an arrangement called Distributor-Managed Inventory (DMI), a significant departure from the more traditional concept of Vendor-Managed Inventory (VMI) model, in which the aforementioned coordination is done by the manufacturer. We analyze the DMI from both the strategic and the economic perspectives and we also analyze its dynamic behavior by using a numerical simulation model which was built for this specific purpose. We demonstrate that the DMI model has advantages over VMI for the management of this four-level supply chain. Our dynamic analysis simulation, for instance, revealed that the DMI model is stable and allowed the studied chain to face increments of 20% of the normal demand level with 55% less inventory at the retail level and 33% less inventory at the distributor level than a reference VMI model.
Supply chain management; retail, distributor-managed inventory; systems dynamics; inventory reduction