Approaches to solving the Inventory Routing Problem


We present an initial investigation into the inventory routing problem (IRP). We first briefly review the literature on applications of the IRP then develop a simple toy simulation of an IRP model. We quantify the inventory and transportation costs incurred in the divergent supply chain. Specifically, we consider the impact of the IRP flexibility on inventory and transportation costs. The IRP flexibility comes from a window of opportunity that the IRP method has created for early replenishments and distribution consolidation. Interestingly, this window of opportunity allows a significant reduction in transportation costs, without unduly influencing inventory costs. However, the marginal benefit produced by the flexibility quickly reduces to zero. This is comforting news for the consuming organizations, as larger windows mean they have less control over their inventory. However, a small window of flexibility does produce real economic and environmental benefits, with only a partial loss of direct inventory control.

EurOMA International Conference on Operations and Global Competitiveness, 19th-22nd June, Budapest, Hungary, 767-774