Integrated inventory routing and freight consolidation for perishable goods

Abstract

We propose a model that integrates inventory routing and freight consolidation for perishable goods with a fixed lifetime. The problem is motivated by the status quo of logistics in some U.S. agriculture markets, but adapts to other relevant two-echelon supply chains, e.g. combined production planning and distribution. We first identify special cases where solving single-echelon subproblems sequentially yields an asymptotically optimal solution. For the general case, we propose an iterative framework that consists of a decomposition procedure and a local search scheme. In the decomposition, a freight consolidation subproblem is first solved to obtain crucial shipping decisions, and after fixing these a restrictive model generates the other decisions for the integrated problem. The local search aims at fast identification of good neighborhoods by solving an assignment-style mixed-integer program that matches the consolidation decision with an inventory routing subproblem, and gradually strengthens the incumbent solution pool when executed in an iterative fashion. Experiments based on empirical demand distributions demonstrate that our proposed iterative framework is quite efficient compared to a sequential approach, and that it effectively solves challenging instances.