An Integrated Model of Continuous Review Inventory and Vehicle Routing Problem with Time Windows

Abstract

Item stock-out or shortage is a great issue for customer satisfaction and can be countered by providing safety stocks. This study discusses an authorized distributor of smartphone and tablet computer products in Indonesia. Currently, the company is considering a plan to take over the role of a logistics service company to reduce the total logistics costs that must be incurred by making improvements in terms of inventory management. Inventory management can also protect the company from the impact of inflation and price increases that will impose logistics costs. This study has assumed that the vehicle travel speed or travel time between two nodes is fixed. This study contributes to minimizing total logistics costs by integrating the concept of a continuous review lot size-reorder point (Q, R) inventory model with lost sales and vehicle routing problems with time windows (VRPTW). Continuous review (Q, R) inventory model with lost sales shows the retailers’ cycle demand ranges from 130 to 234 units. This condition leads to the value of the expected average annual inventory cost IDR 27.263.204.625,59. Based on the VRPTW calculation, the total distribution cost per trip is IDR 445.631.642,7. Based on the current total distribution costs, it was found that the total distribution costs were IDR 849.454.616,2, so there is a decrease in distribution costs of 47.54%. The total logistics cost that must be incurred by the company to deliver smartphone products to 10 retailers in Jakarta and its surrounding areas is IDR 27,708,836,268.29.