An Exact Algorithm for A Multi-Period Inventory Routing Problem with Lateral Transshipment

Abstract

For better supply chain management, it is necessary to think about better managing its cost sources. Inventory is considered the most important element of the supply chain that generates the different logistics costs, mainly the inventory holding cost and the transportation cost. One of the most widely used models to jointly solve these two problems is the Inventory Routing Problem (IRP), which will be the focus of this study. The proposed model in this work deals with a two-tier supply network. The first level contains the supplier with a single vehicle to serve a set of customers with a deterministic and periodic demand that are located at the second level. Our work consists in studying the effect of the increase of the replenishment lead time on the different logistic costs. In addition, we introduced the Lateral Transshipment (LT) technique as an option for inventory transfer if it is economical. New mathematical models corresponding to the above-mentioned problems have been developed and solved by an exact method. The obtained results show that the variation of the replenishment lead time leads to an increase of the different logistics costs and that LT can improve the total network cost and balance the customers' inventory level.