Stochastic inventory routing with time-based shipment consolidation

Danja R. Sonntag, Albert H. Schrotenboer and Gudrun P. Kiesmüller

European Journal of Operational Research, 2023, vol. 306, issue 3, 1186-1201

Abstract: Inspired by the retail industry, we consider a stochastic inventory routing problem where retailers are replenished from a central warehouse using a time-based shipment consolidation policy. Such a time-based dispatching policy, where retailers facing stochastic demand are repetitively replenished at fixed times, is essential in practice. It allows for easy incorporation with dependent up- and downstream planning problems such as personal staffing and warehouse operations, and has become a standard part of transportation contracts. We provide a new chance-constrained model that determines an optimal clustering of retailers in groups, their associated routing and shipment interval, and each retailers’ optimal inventory level. A newly developed branch-price-and-cut algorithm solves our model to optimality. Its efficiency comes from a tailored labeling algorithm for solving the pricing problem that relies, among others, on an optimality pruning criterion based on the approximate solution of a 0,1-knapsack problem. Computational experiments show that our exact method can solve instances of up to 60 retailers to optimality. Besides, we accommodate practitioners by providing a fast heuristic that provides excellent solutions with an optimality gap of less than 1%. Finally, we show that incorporating uncertainty already in the planning process is essential for stochastic inventory routing with time-based shipment consolidation, as it results in overall cost-savings of 7.7% compared to the current state-of-the-art.

Keywords: Transportation; Stochastic inventory routing; Inventory control; Time-based shipment consolidation; Branch-price-and-cut (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:306:y:2023:i:3:p:1186-1201

DOI: 10.1016/j.ejor.2022.07.049

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