Solving a warehouse inventory control problem by Benders decomposition and the Lagrangian relaxation

Abstract

In modern businesses, organizations hold large numbers of inventory items, but cannot find their inventory system economical to make policies for the management of individual inventory items. In this paper, a mathematical model is presented to classify inventory items, taking into account significant profit and cost reduction indices. The model has an objective function to maximize the net profit of items in stock. Limitations such as budget even inventory shortages are taken into account too. The mathematical model is solved by the Benders decomposition and the Lagrange relaxation algorithms. Then, the results of the two solutions are compared. The TOPSIS technique and statistical tests are used to evaluate and compare the proposed solutions with one another and to choose the best one. The results show that the Lagrange algorithm is more efficient for solving the model in terms of both computational time and quality. Subsequently, several sensitivity analyses are performed on the model, which helps inventory control managers determine the effect of inventory management costs on optimal decision making and item grouping. Finally, according to the results of evaluating the efficiency of the proposed model and the solution method, a real-world case study is conducted on the ceramic tile industry. Based on the proposed approach, several managerial perspectives are gained on optimal inventory grouping and item control strategies