Probabilistic Analyses and Algorithms for Three-Level Distribution Systems

Abstract

We consider the problem of integrating inventory control and vehicle routing into a cost-effective strategy for a distribution system consisting of a single outside vendor, a fixed number of warehouses and many geographically dispersed retailers. Each retailer faces a constant, retailer specific, demand rate and inventory holding cost is charged at the retailers and the warehouses. We show that, in an effective strategy which minimizes the asymptotic long run average cost, each warehouse receives fully loaded trucks from the vendor but never holds inventory. That is, each warehouse serves only as a coordinator of the frequency, time and sizes of deliveries to the retailers. This insight is used to construct an inventory control policy and vehicle routing strategy for multi-echelon distribution systems. Computational results are also reported.Multi-Echelon, Inventory-Routing, Probability, Vehicle Routing, Supply Chain Management

Industrial aspects and literature survey: Combined inventory management and routing

“…Chan and Simchi-Levi [38] state the problem as ''a single warehouse serves many retailers which are geographically dispersed in a given area. Stock for a single item is delivered to the retailers by a fleet of vehicles of limited capacity.…”

“…Chan and Simchi-Levi [38] analyze the general setting under the class of fixed partition strategies. Lower bounds for any feasible policy are derived and compared to the asymptotic effectiveness of the fixed partitioning policies.…”

Implementing a Vendor Managed Inventory Policy in a Two-Stage Supply Chain with Stochastic Demands

“…A BRIEF LITERATURE REVIEW One stream of research related to this problem is the single warehouse and multiple-retailers inventory models taking transportation cost into account. Example of such studies are carried by Golden, Assad, and Dahl 1984;Dror and Levy 1986;Dror and Ball 1987;Chandra and Fisher 1994;Gallego and Simchi-Levi 1990;Herer and Roundy 1997;Viswanathan and Mathur 1997;Chan et al 2002;Chan and Simchi-Levi 1998;Aghezzaf 2008. An extension of this research line is concerned with models, involving location-inventory network design, that integrate the location and inventory decisions. Barahona and Jensen (1998) studied a practical distribution network design problem for computer spare parts.…”

Heuristic approaches for the inventory-routing problem with backlogging

“…Some work focused on different structures of the distribution network such as Bard, Huang, Jaillet, and Dror (1998) in the case of satellite facilities, Chan and Simchi-Levi (1998) in the case where warehouses act as transshipment points in a 3-level distribution network, and Hwang (1999 and2000) in the case of a multi-depot problem.…”