An integrated location-inventory model for vendor-managed inventory in the retail supply chain

Abstract

Supply chain management involves multiple and conflicting objectives. A multi-objective optimization procedure which permits a trade-off evaluation for an integrated location-inventory model is initially presented. In this paper, we propose an integrated model to incorporate inventory control decisions - such as economic order quantity, safety stock and inventory replenishment decisions under vendor-managed inventory collaborative initiative - into typical facility location models, which are used to solve the distribution network design problem. This model includes elements of total cost, customer service and flexibility as its objectives. Moreover, a multi-objective evolutionary algorithm is developed to determine the optimal facility location portfolio in order to reach best compromise of these conflicting criteria. A hybrid evolutionary approach is proposed and its scenario analysis is implemented on a real large retail supply chain in Taiwan to investigate the model performance and to illustrate how parameter changes influence its output. Some preliminary results are described.