Innovative vendor-managed inventory strategy exploiting interconnected logistics services in the Physical Internet

Yanyan Yang (), Shenle Pan () and Eric Ballot ()
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Yanyan Yang: CGS i3 - Centre de Gestion Scientifique i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique
Shenle Pan: CGS i3 - Centre de Gestion Scientifique i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique
Eric Ballot: CGS i3 - Centre de Gestion Scientifique i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique

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Abstract: Traditional supply chain networks are often designed in the interests of a company. Once the network has been defined, the storage and distribution of goods are usually fixed and restricted within the network. This is assumed to be an inherent limit of current inventory control research. Instead of specialised hierarchical storage networks, this paper proposes an innovative vendor-managed inventory strategy exploiting the Physical Internet (PI), which is an open, universal, interconnected logistics system. In such a system, facilities and means of transport are shared and can be allocated according to demands of users. As a result, the PI allows users to stock anywhere in the network and also provides open multisourcing options for orders with on-demand warehousing services within the PI. Inventory decisions can be made dynamically by each player to minimise networkwide inventory levels. A non-linear, simulation-based optimisation model was developed for the vendors' inventory decision-making when confronted with stochastic demands. A metaheuristic using simulated annealing was applied to solve the problem, and then, the optimised inventory decisions were validated using simulation. The results suggest that the proposed PI inventory model can reduce the total logistics cost while maintaining a comparable or better level of end customers' services.

Keywords: inventory control; simulation-based optimisation; Physical Internet; vendor-managed inventory; decentralised inventory (search for similar items in EconPapers)
Date: 2016-12-30
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Published in International Journal of Production Research, 2016, 55 (9), pp.2685-2702. ⟨10.1080/00207543.2016.1275871⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01467042

DOI: 10.1080/00207543.2016.1275871

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