Probabilistic Analyses and Algorithms for Three-Level Distribution Systems

We consider the problem of integrating inventory control and vehicle routing into a cost-effective strategy for a distribution system consisting of a single outside vendor, a fixed number of warehouses and many geographically dispersed retailers. Each retailer faces a constant, retailer specific, de...

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Bibliographic Details
Published in:Management science 1998-11, Vol.44 (11-Part-1), p.1562-1576
Main Authors: Chan, Lap Mui Ann, Simchi-Levi, David
Format: Article
Language:English
Subjects:
Algorithms
Applied sciences
Average cost
Carrying costs
Exact sciences and technology
Inventories
Inventory
Inventory control
Inventory control, production control. Distribution
Inventory management
Inventory-Routing
Management science
Mathematical models
Multi-Echelon
Operational research and scientific management
Operational research. Management science
Probability
Probability theory
Retail outlets
Retail stores
Studies
Supply Chain Management
Supply chains
Vehicle Routing
Vehicle size
Vehicles
Vendors
Warehouses
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Summary:We consider the problem of integrating inventory control and vehicle routing into a cost-effective strategy for a distribution system consisting of a single outside vendor, a fixed number of warehouses and many geographically dispersed retailers. Each retailer faces a constant, retailer specific, demand rate and inventory holding cost is charged at the retailers and the warehouses. We show that, in an effective strategy which minimizes the asymptotic long run average cost, each warehouse receives fully loaded trucks from the vendor but never holds inventory. That is, each warehouse serves only as a coordinator of the frequency, time and sizes of deliveries to the retailers. This insight is used to construct an inventory control policy and vehicle routing strategy for multi-echelon distribution systems. Computational results are also reported.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.44.11.1562