Inventory models with reverse logistics for assets acquisition in a liquefied petroleum gas company

Cristina Lopes,Magda Monteiro,Rui Borges Lopes,Aldina Correia,Eliana Costa E Silva

doi:10.1186/s13362-020-00078-0

Abstract

This paper addresses a case study regarding inventory models for acquiring liquefied petroleum gas (LPG) cylinders. This is an industrial challenge that was proposed at an European Study Group with Industry, by a Portuguese energy company, for which the LPG cylinder is the main asset of its LPG business. Due to the importance of this asset, an acquisition plan must be defined in order to determine the amount of LPG cylinders to acquire, and when to acquire them, in order to optimize the investment. As cylinders are returned and refilled, the reverse logistic flows of these assets must be considered. As the classical inventory models are not suitable for this case study, three new inventory models, which account for the return of LPG cylinders, are proposed in this work. The first proposed model considers deterministic constant demand and continuous returns of LPG cylinders, with discrete replenishment from the supplier. The second model is similar, but for the case when the returned cylinders cover for the demand. A third model is also proposed considering that both the demand and the returns are stochastic in nature and the replenishment from the supplier is discrete. The three models address different scenarios that the company is either currently facing or is expecting to occur in the near future.

Highlights

This work addresses an industrial challenge that consists in planning the acquisition of liquefied petroleum gas (LPG) cylinders
As in the classical Economic Order Quantity (EOQ) formula, in this model, the total costs considered are the sum of the acquisition costs CA, setup costs CS and holding costs CH .The acquisition costs in equation (5) consider the cases where: new cylinders are acquired from the supplier with a cost Cm, the cylinders are reused with just a cleaning cost Cu, or the case where the returned cylinders have to be requalified with a cost Cd
4 Conclusions A Portuguese company in the energy sector posed a challenge that consisted in finding the best acquisition plan for LPG cylinders

Summary

Introduction

This work addresses an industrial challenge that consists in planning the acquisition of liquefied petroleum gas (LPG) cylinders. The objective of this industrial challenge was to find a model to forecast the demand and return rate of each type of cylinder, and to define an assets acquisition plan, i.e., to determine when to order to the external supplier new LPG cylinders (Order Point) and how many should be bought (batch size), in order to optimize the investment.

Results

Conclusion