Modeling and Approach for Vendor Managed Inventory Cyclic IRP

Abstract
This paper presents a practical modeling and solution approach for the cyclic inventory routing under constant customer demand rates. The solution approach presented in this paper assumes a given vehicle type. The heuristic solution approach is well capable of finding the appropriate cost trade-off under varying circumstances. Furthermore, when fleet sizing is not considered, the heuristic outperforms an existing heuristic in finding the two way trade-off between distribution and inventory costs. The objective of this inventory routing problem (IRP) is to determine a distribution plan that minimizes average distribution and inventory costs without causing any stock-out at the customers. Deterministic constant customer demand rates are assumed and therefore, a long-term cyclical approach is adopted, integrating fleet sizing, vehicle routing, and inventory management. Further, realistic side-constraints such as limited storage capacities, driving time restrictions and constant replenishment intervals are taken into account. Computational experiments show that our column generation based heuristic solution approach is well capable of finding the appropriate cost trade-off under varying circumstances.

Keywords: IRP, VMI, Supply chain, distribution and inventory costs.

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