Solving Inventory Routing Problem Using Matheuristics Algorithm: A Case Study Of DKSH Vietnam

Abstract

This thesis study introduces the Inventory-Routing Problem (IRP) with multi customer, multi- product and multi-period and direct shipping in a trading company. This problem arises when inventory management and vehicle routing decisions should be integrated simultaneously, which is typically the case in vendor-managed inventory systems. The main objective of this paper is to center on solving the problem that the company is facing and support the company to optimize their current process related to inventory and transportation, so that it can achieve its target in the Key Performance Indicators (KPI). Based on the literature review on inventory routing models, a mathematical model which considers main constrains such as the distance among nodes, customers’ capacity, beginning inventory level at customers, daily demand of customers and trucks capacity is developed to minimize the total cost spent on inventory holding and transportation. The model is solved by IBM CPLEX using the actual data collected from the company to examine whether this approach is practical in reality, giving optimal inventory levels at each customer’s warehouse, delivery schedules with optimal shipped quantity. The findings of this study show a reduction of 37% regarding optimal solution and 15.5% regarding inventory-based matheuristics in the overall cost, demonstrating a positive impact on the company’s performance in terms of inventory and routing.