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The warehouse-inventory-transportation problem for supply chains

Author

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  • Sainathuni, Bhanuteja
  • Parikh, Pratik J.
  • Zhang, Xinhui
  • Kong, Nan

Abstract

Warehouses play a vital role in mitigating variations in supply and demand, and in providing value-added services in a supply chain. However, our observation of supply chain practice reveals that warehousing decisions are not included when developing a distribution plan for the supply chain. This lack of integration has resulted in a substantial variation in workload (42–220%) at our industry partner’s warehouse costing them millions of dollars. To address this real-world challenge, we introduce the warehouse-inventory-transportation problem (WITP) of determining an optimal distribution plan from vendors to customers via one or more warehouses in order to minimize the total distribution cost. We present a nonlinear integer programming model for the WITP considering supply chains with multiple vendors, stores, products, and time-periods, and one warehouse. The model also considers worker congestion at the warehouse that could affect worker productivity. A heuristic based on iterative local search is developed to solve industry-sized problems with up to 500 stores and 1000 products. Our experiments indicate that the distribution plans obtained via the WITP, as compared to a sequential approach, result in a substantial reduction in workload variance at the warehouse, while considerably reducing the total distribution cost. These plans, however, are sensitive to aisle configuration and technology at the warehouse, and the level and productivity of temporary workers.

Suggested Citation

  • Sainathuni, Bhanuteja & Parikh, Pratik J. & Zhang, Xinhui & Kong, Nan, 2014. "The warehouse-inventory-transportation problem for supply chains," European Journal of Operational Research, Elsevier, vol. 237(2), pages 690-700.
  • Handle: RePEc:eee:ejores:v:237:y:2014:i:2:p:690-700
    DOI: 10.1016/j.ejor.2014.02.007
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    References listed on IDEAS

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    1. Oğuz Solyalı & Haldun Süral, 2012. "The one-warehouse multi-retailer problem: reformulation, classification, and computational results," Annals of Operations Research, Springer, vol. 196(1), pages 517-541, July.
    2. Zhao, Qiu-Hong & Chen, Shuang & Zang, Cun-Xun, 2008. "Model and algorithm for inventory/routing decision in a three-echelon logistics system," European Journal of Operational Research, Elsevier, vol. 191(3), pages 623-635, December.
    3. Mark Daskin & Collette Coullard & Zuo-Jun Shen, 2002. "An Inventory-Location Model: Formulation, Solution Algorithm and Computational Results," Annals of Operations Research, Springer, vol. 110(1), pages 83-106, February.
    4. Retsef Levi & Robin Roundy & David Shmoys & Maxim Sviridenko, 2008. "A Constant Approximation Algorithm for the One-Warehouse Multiretailer Problem," Management Science, INFORMS, vol. 54(4), pages 763-776, April.
    5. Gabriel R. Bitran & Horacio H. Yanasse, 1982. "Computational Complexity of the Capacitated Lot Size Problem," Management Science, INFORMS, vol. 28(10), pages 1174-1186, October.
    6. Parikh, Pratik J. & Meller, Russell D., 2010. "A travel-time model for a person-onboard order picking system," European Journal of Operational Research, Elsevier, vol. 200(2), pages 385-394, January.
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    Citations

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    Cited by:

    1. Calvete, Herminia I. & Galé, Carmen & Iranzo, José A., 2014. "Planning of a decentralized distribution network using bilevel optimization," Omega, Elsevier, vol. 49(C), pages 30-41.
    2. Bradley Guthrie & Pratik J. Parikh & Nan Kong, 2017. "Evaluating warehouse strategies for two-product class distribution planning," International Journal of Production Research, Taylor & Francis Journals, vol. 55(21), pages 6470-6484, November.
    3. Yu-Chung Tsao & Vu Thuy Linh, 2016. "Supply Chain Network Designs Developed for Deteriorating Items Under Conditions of Trade Credit and Partial Backordering," Networks and Spatial Economics, Springer, vol. 16(3), pages 933-956, September.
    4. Wen, Xin & Choi, Tsan-Ming & Chung, Sai-Ho, 2019. "Fashion retail supply chain management: A review of operational models," International Journal of Production Economics, Elsevier, vol. 207(C), pages 34-55.
    5. Ming-Jong Yao & Jia-Yen Huang, 2017. "Optimal lot-sizing and joint replenishment strategy under a piecewise linear warehousing cost structure," Journal of Intelligent Manufacturing, Springer, vol. 28(3), pages 791-803, March.

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