Decision analysis of individual supplier in a vendor-managed inventory program with revenue-sharing contract

Summary: Vendor-managed inventory (VMI) programs are a useful strategy in supply chain management to address uncertainty in supply and demand and improve sustainability. However, empirical literature has shown that participants' decisions often deviate from theoretical predictions, and supply chain participants' inequality and decision-makers' personalities can lead to decision divergence. This research proposes a new inventory model that focuses on the theory of choice to understand the supplier's replenishment decision. It also constructs a two-tier supply chain model with a revenue-sharing contract to derive optimal sharing percentage and replenishment quantity.