Quantifying the benefits of continuous replenishment program for partner evaluation

This paper develops a data-driven model that quantifies the benefits of supply chain collaboration initiatives such as a continuous replenishment program (CRP). CRP is a well-established supply chain collaboration program that is widely used in business. The model computes the cost savings of CRP for both partners involving inventory holding, transportation and ordering/handling cost components. The savings drivers associated with each cost component are identified and used to quantify the impact of CRP. The model is applied in a healthcare supply chain case study where a manufacturer seeks to estimate the cost savings of a business relationship with a distributor. The results indicate that CRP reduces the total cost of the supply chain by 19.1%. In this instance, the distributor gains disproportionately more savings in the shared cost components. The variability and sensitivity of cost savings across the network reveal the supply chain parameters that affect the partner savings.