A study of Inventory-Routing problem for the distribution system of a distribution center

Abstract

Most literatures of Inventory-Routing problems find the solutions by simulation, but few solve the real case problem of logistics companies. This research will apply some specific real logistics company's operating data to study the Inventory-Routing problem. This study first develops a mathematical model for this Inventory-Routing problem, next applies Savings method, 2-opt heuristic method and 1-1 lambda -interchange method to obtain the initial feasible solution, finally implements insert_move Tabu search method and swap_move Tabu search method to find the optimal solution. The numerical examples are illustrated to acquire the optimal total inventory routing cost, the optimal delivery routes, the related economic order quantities, the optimal service levels, the reorder points for the retail stores delivered in these proposed routes. The results show this model can be successfully applied in Inventory-Routing problem in a very efficient way. Finally, the performance of this proposed hybrid heuristic approach is compared with Savings method, Heuristic approach, and the current routing planning implemented by this specific logistics company. Accordingly, the outcome of this study is very promising in many aspects and should be helpful to this logistics company for its future planning of the distribution system.