Abstract: The upstreamsegment under vendor managed inventory (VMI) mode is considered in this paper, where VMI is applied between accessory suppliers and a final product manufacturer.With stochastic demands considered, mathematical models are developed for both of the suppliers and the manufacturer to benefit from VMI.To get more profits, the former can increase product prices while the latter can reduce inventory costs.Simulation experiments demonstrate that the winwin result is able to be achieved.

Key words: vender managed inventory (VMI), supply chain, win-win, stochastic demand