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Vendor managed inventory in tramp shipping

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  • Stålhane, Magnus
  • Andersson, Henrik
  • Christiansen, Marielle
  • Fagerholt, Kjetil

Abstract

This paper introduces a new problem to the OR community that combines traditional tramp shipping with a vendor managed inventory (VMI) service. Such a service may replace the more traditional contract of affreightment (COA) which for decades has been the standard agreement between a tramp shipping company and a charterer. We present a mathematical formulation describing the routing and scheduling problem faced by a tramp shipping company that offers a VMI service to its customers. The problem is formulated as an arc-flow model, and is then reformulated as a path-flow model which is solved using a hybrid approach that combines branch-and-price with a priori path-generation. To solve larger, and more realistic, instances we present a heuristic path-generation algorithm. Computational experiments show that the heuristic approach is much faster than the exact method, with insignificant reductions in solution quality. Further, we investigate the economic impact of introducing a VMI service, by comparing the results obtained with the new model with results obtained by solving the traditional routing and scheduling problem faced by tramp shipping companies using COA. The computational results show that it is possible to substantially increase supply chain profit and efficiency by replacing the traditional COAs with VMI services.

Suggested Citation

  • Stålhane, Magnus & Andersson, Henrik & Christiansen, Marielle & Fagerholt, Kjetil, 2014. "Vendor managed inventory in tramp shipping," Omega, Elsevier, vol. 47(C), pages 60-72.
    • Handle: RePEc:eee:jomega:v:47:y:2014:i:c:p:60-72
    DOI: 10.1016/j.omega.2014.03.004
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    2. Pache, Hannah & Kastner, Marvin & Jahn, Carlos, 2019. "Current state and trends in tramp ship routing and scheduling," Chapters from the Proceedings of the Hamburg International Conference of Logistics (HICL), in: Jahn, Carlos & Kersten, Wolfgang & Ringle, Christian M. (ed.), Digital Transformation in Maritime and City Logistics: Smart Solutions for Logistics. Proceedings of the Hamburg International Conference of Logistics, volume 28, pages 369-394, Hamburg University of Technology (TUHH), Institute of Business Logistics and General Management.
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    4. Bilegan, Ioana C. & Crainic, Teodor Gabriel & Wang, Yunfei, 2022. "Scheduled service network design with revenue management considerations and an intermodal barge transportation illustration," European Journal of Operational Research, Elsevier, vol. 300(1), pages 164-177.
    5. Marcus Posada & Henrik Andersson & Carl H. Häll, 2017. "The integrated dial-a-ride problem with timetabled fixed route service," Public Transport, Springer, vol. 9(1), pages 217-241, July.
    6. R. Udayakumar & K. V. Geetha, 2017. "Economic ordering policy for single item inventory model over finite time horizon," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 8(2), pages 734-757, November.
    7. Archetti, Claudia & Christiansen, Marielle & Grazia Speranza, M., 2018. "Inventory routing with pickups and deliveries," European Journal of Operational Research, Elsevier, vol. 268(1), pages 314-324.
    8. Qian, Fubin & Strusevich, Vitaly & Gribkovskaia, Irina & Halskau, Øyvind, 2015. "Minimization of passenger takeoff and landing risk in offshore helicopter transportation: Models, approaches and analysis," Omega, Elsevier, vol. 51(C), pages 93-106.
    9. Chandra, Saurabh & Christiansen, Marielle & Fagerholt, Kjetil, 2016. "Combined fleet deployment and inventory management in roll-on/roll-off shipping," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 92(C), pages 43-55.
    10. Agra, Agostinho & Christiansen, Marielle & Wolsey, Laurence, 2022. "Improved models for a single vehicle continuous-time inventory routing problem with pickups and deliveries," European Journal of Operational Research, Elsevier, vol. 297(1), pages 164-179.

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