The inventory routing problem: the value of integration

Abstract

We consider an inventory routing problem in which a supplier delivers goods to customers over a given planning period. Before the advent of the supply chain management concept, customers usually applied a (s, S) policy for the inventory management. The supplier then, on the basis of the distribution schedule determined by the customers, organized the distribution routes. In an integrated approach, the supplier has access to the inventory levels at the customers and knowledge of their demand process. On the basis of this information the supplier organizes a complete distribution plan, determining the days of visit, quantities to deliver, and distribution routes. This integrated policy is called vendor-managed inventory policy. We solve the optimization problems arising in the traditional and integrated management, and analyze the two approaches, comparing the costs and characteristics of the different solutions.

Operations Research in Transportation and Supply Chain Management

“…One of the first papers that showed the benefits of integrated decisions is due to Chandra and Fisher [11]. More recently, Archetti and Speranza [6] compared the heuristic solution of an inventory-routing problem with the solution obtained by sequentially and optimally solving the inventory management and the routing problems. The sequential solution models a traditional management style where customers of a supply chain control their inventory and decide order times and quantities.…”

“…The inventory-routing problem models a more recent integrated policy, called Vendor Managed Inventory (VMI), where the supplier is responsible for the distribution and for the inventory at its customers. In [6] the results of computational tests show that solutions of the inventory-routing problem allow average savings of 10%. The integration of production and inventory-routing is studied in [1].…”

Managing an External Depot in a Production Routing Problem

“…In the OU replenishment policy, all customers have a maximum storage capacity and the quantity delivered is such that the maximum level of storage is reached at each delivery. While in the ML policy all customers have a maximum storage capacity and the quantity delivered is such that the maximum level of storage is not exceeded at each delivery [4] . Regarding the VMI, it is a practice in which the supplier decides when and how much to deliver to the customer based on customers' inventory information.…”

“…The CMI or RMI is therefore an appropriate practice for VRP. For a comparative study between the CMI and the VMI see [4]. In a supply chain, the production problem is solved independently of the decisions that characterize the VRP or the IRP.…”

Iterated local search and simulated annealing algorithms for the inventory routing problem

“…The authors developed heuristic and hybrid algorithms to solve the problem. Archetti and Speranza () showed the importance of the IRP by comparing the heuristic solution of the IRP with the solution obtained by sequentially solving to optimality an inventory management problem and then a vehicle routing problem.…”