A simheuristic algorithm for the Single-Period Stochastic Inventory-Routing Problem with stock-outs

Abstract

This paper describes a ‘simheuristic’ algorithm – one which combines simulation with heuristics – for solving a stochastic variant of the well-known Inventory-Routing Problem. The variant discussed here is integrated by a vehicle routing problem and several inventory problems characterized by stochastic demands. Initial stock levels and potential stock-outs are also considered, as well as a set of alternative refill policies for each retail center. The goal is to find the personalized refill policies and associated routing plan that minimize, at each single period, the expected total costs of the system, i.e., the sum of inventory and routing costs. After motivating it, a detailed description of the problem is provided. Then, a review of the related literature is performed and our simulation–optimization approach is introduced. The paper presents a set of numerical experiments comparing the proposed method against different refill strategies and discusses how total costs evolve as the level of system uncertainty and the inventory-holding costs per unit are varied.