Cash flow optimization in delivery scheduling

The paper examines the inventory routing problem from the perspective of the present value of the cash flow associated with the distribution of a commodity such as propane. We analyze this problem for both deterministic and stochastic customer demands and validate our results on data from a real life distribution operation of propane. The analysis based on the present value of the cash flow indicates that optimization of propane deliveries based on efficiency/cost criteria alone will generate inferior solutions and it would be more advantageous for the company to set deliveries for a large percentage of the customers based on the present value of cash flow. In addition, in the case of stochastic demands, deliveries based on the cash flow consideration will tend to reduce the number of stockouts (i.e. improve both profit and service).