Probabilistic Analyses and Algorithms for Three-Level Distribution Systems

Lap Mui Ann Chan and David Simchi-Levi
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Lap Mui Ann Chan: University of Toronto, Toronto, Canada
David Simchi-Levi: Department of Industrial Engineering and Management Sciences, Northwestern University, Evanston, Illinois 60208

Management Science, 1998, vol. 44, issue 11-Part-1, 1562-1576

Abstract: 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.

Keywords: Multi-Echelon; Inventory-Routing; Probability; Vehicle Routing; Supply Chain Management (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (15)

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