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Inventory service-level optimization within distribution network design problem

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  • Miranda, Pablo A.
  • Garrido, Rodrigo A.

Abstract

We propose a sequential heuristic approach to optimize inventory service levels in a two-stage supply chain. The proposed approach deals with service level and inventory decisions, simultaneously with network design decisions, and incorporating unfulfilled demand costs in a previous inventory-location model. A two-step formulation is considered, where the first step optimizes service level and the second step addresses location and inventory decisions. Each algorithm iteration solves an inventory-location model for a fixed service level, and then the service level is updated in order to reach an equilibrium condition between operating system and unfulfilled demand costs. The algorithm converged in three iterations for a set of sample instances, obtaining the same outcome in comparison with a more intuitive, exact, but more time-consuming search procedure.

Suggested Citation

  • Miranda, Pablo A. & Garrido, Rodrigo A., 2009. "Inventory service-level optimization within distribution network design problem," International Journal of Production Economics, Elsevier, vol. 122(1), pages 276-285, November.
    • Handle: RePEc:eee:proeco:v:122:y:2009:i:1:p:276-285
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    References listed on IDEAS

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    2. Wu, Ting & Shen, Houcai & Zhu, Cheng, 2015. "A multi-period location model with transportation economies-of-scale and perishable inventory," International Journal of Production Economics, Elsevier, vol. 169(C), pages 343-349.
    3. Nickel, Stefan & Saldanha-da-Gama, Francisco & Ziegler, Hans-Peter, 2012. "A multi-stage stochastic supply network design problem with financial decisions and risk management," Omega, Elsevier, vol. 40(5), pages 511-524.
    4. Aaron Guerrero Campanur & Elias Olivares-Benitez & Pablo A. Miranda & Rodolfo Eleazar Perez-Loaiza & Jose Humberto Ablanedo-Rosas, 2018. "Design of a Logistics Nonlinear System for a Complex, Multiechelon, Supply Chain Network with Uncertain Demands," Complexity, Hindawi, vol. 2018, pages 1-16, November.
    5. Dezhi Zhang & Shuxin Yang & Shuangyan Li & Jiajun Fan & Bin Ji, 2020. "Integrated Optimization of the Location–Inventory Problem of Maintenance Component Distribution for High-Speed Railway Operations," Sustainability, MDPI, vol. 12(13), pages 1-25, July.
    6. Alaei, Saeed & Setak, Mostafa, 2015. "Multi objective coordination of a supply chain with routing and service level consideration," International Journal of Production Economics, Elsevier, vol. 167(C), pages 271-281.
    7. Escalona, P. & Marianov, V. & Ordóñez, F. & Stegmaier, R., 2018. "On the effect of inventory policies on distribution network design with several demand classes," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 111(C), pages 229-240.
    8. Shu, Jia & Li, Zhengyi & Shen, Houcai & Wu, Ting & Zhong, Weijun, 2012. "A logistics network design model with vendor managed inventory," International Journal of Production Economics, Elsevier, vol. 135(2), pages 754-761.
    9. Guerrero, W.J. & Prodhon, C. & Velasco, N. & Amaya, C.A., 2013. "Hybrid heuristic for the inventory location-routing problem with deterministic demand," International Journal of Production Economics, Elsevier, vol. 146(1), pages 359-370.
    10. Cannella, Salvatore & Framinan, Jose M. & Bruccoleri, Manfredi & Barbosa-Póvoa, Ana Paula & Relvas, Susana, 2015. "The effect of Inventory Record Inaccuracy in Information Exchange Supply Chains," European Journal of Operational Research, Elsevier, vol. 243(1), pages 120-129.
    11. Darmawan, Agus & Wong, Hartanto & Thorstenson, Anders, 2021. "Supply chain network design with coordinated inventory control," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).

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