This paper discusses the operating parameters of a two-echelon 'm'
Vendors - 'n' Buyers Vendor Managed Inventory (VMI) System with
outsourcing (MVMBO). The operational parameters to the above model
are the selling prices at the buyer's market and the contract prices
between the vendors and the buyers. Selling prices depend on sales
quantities and determines the channel profit of the supply chain
(SC). Contract prices depend on the understanding between partners
on their revenue sharing agreement. A mathematical model of the MV
MBO model is formulated to find optimal sales quantities (summation
of optimal transaction quantities) for maximum channel profit.
Optimal outsourcing quantities, selling prices and acceptable
contract prices are derived from the obtained optimal transaction
quantities. The mathematical model formulation of MV MBO involves
mixed integer variable, a non-linear objective function and linear
constraints which fall under the category of Mixed Integer
Non-linear Programming (MINP) optimization problem. Simulated
Annealing Algorithm (SAA) based heuristic is proposed to find the
optimal operational parameters of the MVMBO problem. The proposed
methodology is evaluated for its solution quality.