A decomposition framework for distribution of fluid products by a vendor-managed-inventory methodology

Abstract

Abstract Vendor-Managed Inventory (VMI) is a business practices based on the cooperation between a supplier and its customers in which demand and inventory information from the customers are shared with the supplier. The practice is based on the inventory-routing problem (IRP), which integrates inventory management, vehicle routing, and delivery scheduling decisions. Because of the large expenses in distribution and inventorying of chemical products, it is attractive to make use of optimization tools for exploiting as many degrees of freedom as possible in order to save costs. So, we propose a nested column generation (CG) algorithm for a problem related to the distribution of multiple chemicals fluids according to the VMI-modality. Our approach builds on a CG algorithm in which, for each delivery route, the patterns of delivery of fluids are also produced by CG. We describe our implementation and give computational results for a test instance.