Application of optimization model for two-echelon inventory routing problem: A case of beverage distribution systems in Vietnam

Abstract

Logistics costs in Vietnam are high compared to the region. Some businesses have adopted Vendor Managed Inventory (VMI) which has helped reduce costs and also limit the Bullwhip effect. However, when applying VMI, businesses must solve the inventory Routing problem (IRP). IRP is a complex problem that combines inventory management and delivery scheduling to optimize costs. In this study, I will build two mathematical models based on a theory graph. One model follows a directed graph and the other an undirected graph. The study will compare the results of the two models and select the optimal model for future research. During the implementation of the study, the author found that the FI model had some points that were not suitable for reality, so he proposed a new FIII model to replace the FI model by changing some set notations and constraints. The results show that the FII (directed graph) model gives the best results among the models. However, the FIII model shows better processing performance than the FII model. The study has produced a mathematical model that can solve the IRP problem in a suitable time. In the future, the author will consider some more factors such as timewindow, green logistics, and traffic jams. Besides, applying metaheuristics to scale up the problem is more suitable with the external real system.