Model and algorithm for inventory/routing decision in a three-echelon logistics system

• Published in: European journal of operational research 2008-12, Vol.191 (3), p.623-635
• Main Authors: Zhao, Qiu-Hong, Chen, Shuang, Zang, Cun-Xun
• Format: Article
• Language: English
• Subjects: Algorithms; Applied sciences; Exact sciences and technology; Fixed partition and power-of-two (FP–POT) strategy; Inventory; Inventory and routing decision; Inventory control, production control. Distribution; Inventory management; Logistics; Operational research and scientific management; Operational research. Management science; Optimization algorithms; Routing; Studies; Three-echelon logistics system; Variable large neighborhood search (VLNS); Variable neighborhood search (VNS)
• ISSN: 0377-2217; 1872-6860
• DOI: 10.1016/j.ejor.2006.12.056

This paper addresses an integrated inventory and routing problem in a three-echelon logistics system, which consists of a supplier, a central warehouse and a group of retailers. The inventory decision of each member and the routing decision among members of the system are made simultaneously, with the objective of minimizing the overall average cost of the system. A strategy named fixed partition and power-of-two (FP–POT) is proposed for the considered problem and a variable large neighborhood search (VLNS) algorithm, which is a special case of variable neighborhood search (VNS) algorithm, is developed. The efficiency of the strategy as well as the algorithm is illustrated by comparing computational results with a lower bound. The advantage of the proposed VLNS algorithm is further shown by getting better results for the problems in a two-echelon logistics system, which have been solved by a Tabu Search algorithm recently.