Inventory Routing Problem With Deterministic Demand Using Vendor-Managed Inventory Policy: A Case Study Of Fact-Depot Company

Abstract

The integration of inventory and distribution planning with a single product and multiple vehicles is one of the recent common challenges in the supply chain. This study presents a mathematical model for inventory routing problems (IRP) using Vendor-managed inventory (VMI) in which customer demands must be satisfied in each period and avoid stock-out at the customer’s side. A mixed-integer model is developed to control inventory, to decide the number of products shipped to customers and the routing process whereas minimizing the total cost including transportation and inventory holding cost. The mathematical model is then programmed in CPLEX to find the optimal solution. This research considers the case study of Fact-depot company – an e-commerce company selling industrial equipment and chemical. The goal is to provide Fact-depot's decision-makers with a model and tool to implement inventory, vehicle routing optimization models in logistics. The experimental results have shown that the proposed model helps improve up to 13% of the total cost compared to the current approach of the company.