An Inventory-Location Model: Formulation, Solution Algorithm and Computational Results

We introduce a distribution center (DC) location model that incorporates working inventory and safety stock inventory costs at the distribution centers. In addition, the model incorporates transport costs from the suppliers to the DCs that explicitly reflect economies of scale through the use of a fixed cost term. The model is formulated as a non-linear integer-programming problem. Model properties are outlined. A Lagrangian relaxation solution algorithm is proposed. By exploiting the structure of the problem we can find a low-order polynomial algorithm for the non-linear integer programming problem that must be solved in solving the Lagrangian relaxation subproblems. A number of heuristics are outlined for finding good feasible solutions. In addition, we describe two variable forcing rules that prove to be very effective at forcing candidate sites into and out of the solution. The algorithms are tested on problems with 88 and 150 retailers. Computation times are consistently below one minute and compare favorably with those of an earlier proposed set partitioning approach for this model (Shen, 2000; Shen, Coullard and Daskin, 2000). Finally, we discuss the sensitivity of the results to changes in key parameters including the fixed cost of placing orders. Significant reductions in these costs might be expected from e-commerce technologies. The model suggests that as these costs decrease it is optimal to locate additional facilities.     

A genetic algorithm for a single product network design model with lead time and safety stock considerations

We consider a two-stage supply chain with a production facility that replenishes a single product at retailers. The objective is to locate distribution centers in the network such that the sum of facility location, pipeline inventory, and safety stock costs is minimized. We explicitly model the relationship between the flows in the network, lead times, and safety stock levels. We use genetic algorithms to solve the model and compare their performance to that of a Lagrangian heuristic developed in earlier work. A novel chromosome representation that combines binary vectors with random keys provides solutions of similar quality to those from the Lagrangian heuristic. The model is then extended to incorporate arbitrary demand variance at the retailers. This modification destroys the structure upon which the Lagrangian heuristic is based, but is easily incorporated into the genetic algorithm. The genetic algorithm yields significantly better solutions than a greedy heuristic for this modification and has reasonable computational requirements.     

A coordinated location-inventory model

We consider a coordinated location-inventory model where distribution centers (DCs) follow a periodic-review (R, S) inventory policy and system coordination is achieved by choosing review intervals at the DCs from a menu of permissible choices. We introduce two types of coordination: partial coordination where each DC may choose its own review interval from the menu, and full coordination where all the DCs have an identical review interval. While full coordination increases the location and inventory costs, it likely reduces the overall costs of running the system (when the operational costs such as delivery scheduling are taken into account). The problem is to determine the location of the DCs to be opened, the assignment of retailers to DCs, and the inventory policy parameters at the DCs such that the total system-wide cost is minimized. The model is formulated as a nonlinear integer-programming problem and a Lagrangian relaxation algorithm is proposed to solve it. Computational results show that the proposed algorithm is very efficient. The results of our computational experiments and case study suggest that the location and inventory cost increase due to full coordination, when compared to partial coordination, is not significant. Thus, full coordination, while enhancing the practicality of the model, is economically justifiable.     

Integrated location and two-echelon inventory network design under uncertainty

In this paper, we propose a two-stage stochastic model to address the design of an integrated location and two-echelon inventory network under uncertainty. The central issue in this problem is to design and operate an effective and efficient multi-echelon supply chain distribution network and to minimize the expected system-wide cost of warehouse location, the allocation of warehouses to retailers, transportation, and two-echelon inventory over an infinite planning horizon. We structure this problem as a two-stage nonlinear discrete optimization problem. The first stage decides the warehouses to open and the second decides the warehouse-retailer assignments and two-echelon inventory replenishment strategies. Our modeling strategy incorporates various probable scenarios in the integrated multi-echelon supply chain distribution network design to identify solutions that minimize the first stage costs plus the expected second stage costs. The two-echelon inventory cost considerations result in a nonlinear objective which we linearize with an exponential number of variables. We solve the problem using column generation. Our computational study indicates that our approach can solve practical problems of moderate-size with up to twenty warehouse candidate locations, eighty retailers, and ten scenarios efficiently.     

Incorporating inventory and routing costs in strategic location models

We consider a supply chain design problem where the decision maker needs to decide the number and locations of the distribution centers (DCs). Customers face random demand, and each DC maintains a certain amount of safety stock in order to achieve a certain service level for the customers it serves. The objective is to minimize the total cost that includes location costs and inventory costs at the DCs, and distribution costs in the supply chain. We show that this problem can be formulated as a nonlinear integer programming model, for which we propose a Lagrangian relaxation based solution algorithm. By exploring the structure of the problem, we find a low-order polynomial algorithm for the nonlinear integer programming problem that must be solved in solving the Lagrangian relaxation sub-problems. We present computational results for several instances of the problem with sizes ranging from 40 to 320 customers. Our results show the benefits of having an integrated supply chain design framework that includes location, inventory, and routing decisions in the same optimization model.     

Characterization of facility assignment costs for a location-inventory model under truckload distribution

We consider a two-stage distribution system, where the first stage consists of potential distribution centres (DCs) and the second stage consists of geographically dispersed existing retailers. Our goal is to determine the set of open DCs and assignment of open DCs to retailers simultaneously with inventory decisions of retailers. In addition to the DC-specific fixed facility location costs, we explicitly model the inventory replenishment and holding costs at the retailers and truckload transportation costs between the DCs and the retailers. The transportation costs are subject to truck/cargo capacity, leading to an integrated location-inventory problem with explicit cargo costs. We develop a mixed-integer nonlinear model and analyse its structural properties leading to exact expressions for the so-called implied facility assignment costs and imputed per-unit per-mile transportation costs. These expressions analytically demonstrate the interplay between strategic location and tactical inventory/transportation decisions in terms of resulting operational costs. Although both the theory and practice of integrated logistics have recognized the fact that strategic and tactical decisions are interrelated, to the best of our knowledge, our paper is the first to offer closed-form results demonstrating the relationship explicitly. We propose an efficient solution approach utilizing the implied facility assignment costs and we demonstrate that significant savings are realizable when the inventory decisions and cargo costs are modelled explicitly for facility location purposes.     

Linear programming based decomposition methods for inventory distribution systems

We consider an inventory distribution system consisting of one warehouse and multiple retailers. The retailers face random demand and are supplied by the warehouse. The warehouse replenishes its stock from an external supplier. The objective is to minimize the total expected replenishment, holding and backlogging cost over a finite planning horizon. The problem can be formulated as a dynamic program, but this dynamic program is difficult to solve due to its high dimensional state variable. It has been observed in the earlier literature that if the warehouse is allowed to ship negative quantities to the retailers, then the problem decomposes by the locations. One way to exploit this observation is to relax the constraints that ensure the nonnegativity of the shipments to the retailers by associating Lagrange multipliers with them, which naturally raises the question of how to choose a good set of Lagrange multipliers. In this paper, we propose efficient methods that choose a good set of Lagrange multipliers by solving linear programming approximations to the inventory distribution problem. Computational experiments indicate that the inventory replenishment policies obtained by our approach can outperform several standard benchmarks by significant margins.     

New mathematical model for the bi-objective inventory routing problem with a step cost function: A multi-objective particle swarm optimization solution approach

Inventory management and satisfactory distribution are among the most important issues considered by distribution companies. One of the key objectives is the simultaneous optimization of the inventory costs and distribution expenses, which can be addressed according to the inventory routing problem (IRP). In this study, we present a new transport cost calculation pattern for the IRP based on some real cases. In this pattern, the transportation cost is calculated as a function of the load carried and the distance traveled by the vehicle based on a step cost function. Furthermore, previous methods usually aggregate the inventory and transportation costs to formulate them as a single objective function, but in non-cooperative real-life cases, the inventory-holding costs are paid by retailers whereas the transportation-related costs are paid by the distributor. In this study, we separate these two cost elements and introduce a bi-objective IRP formulation where the first objective is to minimize the inventory-holding cost and the second is minimizing the transportation cost. We also propose an efficient particle representation and employ a multi-objective particle swarm optimization algorithm to generate the non-dominated solutions for the inventory allocation and vehicle routing decisions. Finally, in order to evaluate the performance of the proposed algorithm, the results obtained were compared with those produced using the augmented ε-constraint method, thereby demonstrating the practical utility of the proposed multi-objective model and the proposed solution algorithm.     

Capacitated replenishment and disposal planning for multiple products with resalable returns

We consider a replenishment and disposal planning problem (RDPP) that arises in settings where customer returns are in as-good-as-new condition. These returns can be placed into inventory to satisfy future demand or can be disposed of, in case they lead to excess inventory. Our focus is on a multi-product setting with dynamic demands and returns over a finite planning horizon with explicit replenishment and disposal capacities. The problem is to determine the timing of replenishment and disposal setups, along with the associated quantities for the products, so as to minimize the total costs of replenishment, disposal, and inventory holding throughout the planning horizon. We examine two variants of the RDPP of interest both of which are specifically motivated by a spare part kitting application. In one variant, the replenishment capacity is shared among multiple products while the disposal capacity is product specific. In the other variant, both the replenishment and disposal capacities are shared among the products. We propose a Lagrangian Relaxation approach that relies on the relaxation of the capacity constraints and develop a smoothing heuristic that uses the solution of the Lagrangian problem to obtain near-optimal solutions. Our computational results demonstrate that the proposed approach is very effective in obtaining high-quality solutions with a reasonable computational effort.     

A solution approach to the inventory routing problem in a three-level distribution system

We consider the infinite horizon inventory routing problem in a three-level distribution system with a vendor, a warehouse and multiple geographically dispersed retailers. In this problem, each retailer faces a demand at a deterministic, retailer-specific rate for a single product. The demand of each retailer is replenished either from the vendor through the warehouse or directly from the vendor. Inventories are kept at both the retailers and the warehouse. The objective is to determine a combined transportation (routing) and inventory strategy minimizing a long-run average system-wide cost while meeting the demand of each retailer without shortage. We present a decomposition solution approach based on a fixed partition policy where the retailers are partitioned into disjoint and collectively exhaustive sets and each set of retailers is served on a separate route. Given a fixed partition, the original problem is decomposed into three sub-problems. Efficient algorithms are developed for the sub-problems by exploring important properties of their optimal solutions. A genetic algorithm is proposed to find a near-optimal fixed partition for the problem. Computational results show the performance of the solution approach.     

A Lagrangian relaxation approach to simultaneous strategic and tactical planning in supply chain design

We study a multi-echelon joint inventory-location model that simultaneously determines the location of warehouses and inventory policies at the warehouses and retailers. The model is formulated as a nonlinear mixed-integer program, and is solved using a Lagrangian relaxation-based approach. The efficiency of the algorithm and benefits of integration are evaluated through a computational study.     

Notes on the single route lateral transhipment problem

Previous research has analyzed deterministic and stochastic models of lateral transhipments between different retailers in a supply chain. In these models the analysis assumes given fixed transhipment costs and determines under which situations (magnitudes of excess supply and demand at various retailers) the transhipment is profitable. However, in reality, these depend on aspects like the distance between retailers or the transportation mode chosen. In many situations, combining the transhipments may save transportation costs. For instance, one or more vehicle routes may be used to redistribute the inventory of the potential pickup and delivery stations. This can be done in any sequence as long as the vehicle capacity is not violated and there is enough load on the vehicle to satisfy demand. The corresponding problem is an extension of the one-commodity pickup and delivery traveling salesman and the pickup and delivery vehicle routing problem. When ignoring the routing aspect and assuming given fixed costs, transhipment is only profitable if the quantities are higher than a certain threshold. In contrast to that, the selection of visited retailers is dependent on the transportation costs of the tour and therefore the selected retailers are interrelated. Hence the problem also has aspects of a (team) orienteering problem. The main contribution is the discussion of the tour planning aspects for lateral transhipments which may be valuable for in-house planning but also for price negotiations with external contractors. A mixed integer linear program for the single route and single commodity version is presented and an improved LNS framework to heuristically solve the problem is introduced. Furthermore, the effect of very small load capacity on the structure of optimal solutions is discussed.     

An integrated inventory–transportation system with modified periodic policy for multiple products

Efficient management of a distribution system requires an integrated approach towards various logistical functions. In particular, the fundamental areas of inventory control and transportation planning need to be closely coordinated. Our model deals with an inbound material-collection problem. An integrated inventory–transportation system is developed with a modified periodic-review inventory policy and a travelling-salesman component. This is a multi-item joint replenishment problem, in a stochastic setting, with simultaneous decisions made on inventory and transportation policies. We propose a heuristic decomposition method to solve the problem, minimizing the long-run total average costs (major- and minor-ordering, holding, backlogging, stopover and travel). The decomposition algorithm works by using separate calculations for inventory and routing decisions, and then coordinating them appropriately. A lower bound is constructed and computational experience is reported.     

A Heuristic for a Resource-capacitated Multi-stage Lot-sizing Problem with Lead Times

In this paper we propose a heuristic for the resource-capacitated multi-stage lot-sizing problem with general product structures, set-up costs and resource usage, work-in-process inventory costs and lead times. To facilitate the functioning of the heuristic, we use the formulation of the problem based on Echelon Stock in a rolling horizon scheme. The heuristic first obtains a reasonable solution to the corresponding uncapacitated problem and then tries to attain capacity feasibility by shifting production backwards in time. The concept of echelon stock makes the task of checking the inventory feasibility of proposed shifts easier than would be the case with conventional installation stock. The heuristic is first tested computationally for problems with a five-component product structure over a 12 period planning horizon for which optimal solutions were available and for which optimality precision guarantees were also obtained via Lagrangian Relaxation. The heuristic's performance is also explored with two different 40-component product structures, with high and low set-up costs, and is compared with the Lagrangian precision guarantees.     

A multi-period order selection problem in flexible manufacturing systems

We consider a multi-period order selection problem in flexible manufacturing systems, which is the problem of selecting orders to be produced in each period during the upcoming planning horizon with the objective of minimising earliness and tardiness costs and subcontracting costs. The earliness and tardiness costs are incurred if an order is not finished on time, while subcontracting cost is incurred if an order is not selected within the planning horizon (and must be subcontracted) due to processing time capacity or tool magazine capacity. This problem is formulated as a 0–1 integer program which can be transformed into a generalised assignment problem. To solve the problem, a heuristic algorithm is developed using a Lagrangian relaxation technique. Effectiveness of the algorithm is tested on randomly generated problems and results are reported.     

Minimizing the Total Cost in an Integrated Vendor—Managed Inventory System

In this paper we consider a complex production-distribution system, where a facility produces (or orders from an external supplier) several items which are distributed to a set of retailers by a fleet of vehicles. We consider Vendor-Managed Inventory (VMI) policies, in which the facility knows the inventory levels of the retailers and takes care of their replenishment policies. The production (or ordering) policy, the retailers replenishment policies and the transportation policy have to be determined so as to minimize the total system cost. The cost includes the fixed and variable production costs at the facility, the inventory costs at the facility and at the retailers and the transportation costs, that is the fixed costs of the vehicles and the traveling costs. We study two different types of VMI policies: The order-up-to level policy, in which the order-up-to level quantity is shipped to each retailer whenever served (i.e. the quantity delivered to each retailer is such that the maximum level of the inventory at the retailer is reached) and the fill-fill-dump policy, in which the order-up-to level quantity is shipped to all but the last retailer on each delivery route, while the quantity delivered to the last retailer is the minimum between the order-up-to level quantity and the residual transportation capacity of the vehicle. We propose two different decompositions of the problem and optimal or heuristic procedures for the solution of the subproblems. We show that, for reasonable initial values of the variables, the order in which the subproblems are solved does not influence the final solution. We will first solve the distribution subproblem and then the production subproblem. The computational results show that the fill-fill-dump policy reduces the average cost with respect to the order-up-to level policy and that one of the decompositions is more effective. Moreover, we compare the VMI policies with the more traditional Retailer-Managed Inventory (RMI) policy and show that the VMI policies significantly reduce the average cost with respect to the RMI policy.     

考虑释放时间的单机JIT调度问题

本文主要研究二级供应链中的生产-库存-直接配送协同调度问题,其中存在一个制造商和多个零售商, 制造商根据订单进行生产, 然后将产品配送给零售商。该类问题可以抽象为考虑释放时间的单机JIT调度问题。借助于禁忌搜索算法, 本文提出了求解问题的CTA-TS算法, 并通过大量的实验数据与已有算法进行比较,说明了本文提出算法的有效性。     

Dynamic economic lot size model with perishable inventory and capacity constraints

In this study, we consider a dynamic economic lot sizing problem for a single perishable item under production capacities. We aim to identify the production, inventory and backlogging decisions over the planning horizon, where (i) the parameters of the problem are deterministic but changing over time, and (ii) producer has a constant production capacity that limits the production amount at each period and is allowed to backorder the unmet demand later on. All cost functions are assumed to be concave. A similar problem without production capacities was studied in the literature and a polynomial time algorithm was suggested (Hsu, 2003 [1]). We assume age-dependent holding cost functions and the deterioration rates, which are more realistic for perishable items. Backordering cost functions are period-pair dependent. We prove the NP-hardness of the problem even with zero inventory holding and backlogging costs under our assumptions. We show the structural properties of the optimal solution and suggest a heuristic that finds a good production and distribution plan when the production periods are given. We discuss the performance of the heuristic. We also give a Dynamic Programing-based heuristic for the solution of the overall problem.     

Heuristic algorithms for a multi-period multi-stop transportation planning problem

We consider a multi-period multi-stop transportation planning problem (MPMSTP) in a one-warehouse multi-retailer distribution system where a fleet of homogeneous vehicles delivers products from a warehouse to retailers. The objective of the MPMSTP is to minimize the total transportation distance for product delivery over the planning horizon while satisfying demands of the retailers. We suggest two heuristic algorithms based on the column generation method and the simulated annealing algorithm. Computational experiments on randomly generated test problems showed that the suggested algorithms gave better solutions than an algorithm currently used in practice and algorithms modified from existing algorithms for vehicle routing problems.     

Hybrid heuristics for a short sea inventory routing problem

We consider a short sea fuel oil distribution problem where an oil company is responsible for the routing and scheduling of ships between ports such that the demand for various fuel oil products is satisfied during the planning horizon. The inventory management has to be considered at the demand side only, and the consumption rates are given and assumed to be constant within the planning horizon. The objective is to determine distribution policies that minimize the routing and operating costs, while the inventory levels are maintained within their limits. We propose an arc-load flow formulation for the problem which is tightened with valid inequalities. In order to obtain good feasible solutions for planning horizons of several months, we compare different hybridization strategies. Computational results are reported for real small-size instances.