Online Access: www.absronline.org/journals *Corresponding author: Ramin Sadeghian PhD , Assistant Professor at Industrial Engineering Group, Payame Noor University, Iran E-Mail: sadeghian@pnu.ac.ir 125 International Journal of Operations and Logistics Management Volume 4, Issue 2 Pages: 125-138 June 2015 e-ISSN: 2309-8023 p-ISSN: 2310-4945 An Inventory Model for Tri-Stage Supply Chain with a Warehouse, Stochastic Demand and Multi Retailers and Vendors Ramin Sadeghian 1 *, Golnaz Talebi Langaroudi 2 , and Nima Zoraghi 3 1. Assistant Professor, Industrial Engineering Group, Payame Noor University, Iran (sadeghian@pnu.ac.ir) 2. MS, Industrial Engineering Group, Payame Noor University, Iran (g_talebi101@yahoo.com) 3. MS, Faculty of industrial and mechanical engineering, Islamic Azad University, Qazvin Branch, Iran (nima.zoraghi@gmail.com) This research considers a tri-stage supply chain with three vendors, four retailers and a warehouse entitled by vendor management inventory (VMI) to support the vendors. In the proposed model, the annual order and warehouse capacity is limited. Also demand is probabilistic and follows from Normal density function. The main goal is minimization of the total cost of supply chain such as holding and ordering cost for retailers, vendors and warehouse. An integer non-linear programming (INLP) with stochastic demand is designed, then is solved and analyzed by CPLEX software and Taguchi method. Keywords: Tri-stage Supply Chain, Inventory Management, Warehouse, Stochastic Demand, Taguchi Method INTRODUCTION Ideally, decision making in a supply chain can be controlled by a central decision-maker in order to optimize the performance of system that is called centralized supply chain. However, neither vendors nor retailers can control the entire supply chain. Members of supply chain has their own aims and priorities and try to optimize their individual performance before they consider the overall performance of system. In fact, when the supply chain members are independent of each other they will try independently in order to improve their performance. In this case, we will call it decentralized supply chain. Decentralized structure of supply chain leads to Bullwhip Effect that undermines the function of supply chain. Vendor management inventory (VMI) is one of the strategies that many companies use them in past two decades in order to integrate the supply chain. Vendor management inventory shows a high level of cooperation between vendor and retailer where the vendor is main decision maker for controlling inventory. Under this approach, the vendor makes decision about appropriate levels of inventory of each products and appropriate approach in order to control the level of decision making. In other words, VMI is a continuous process where the