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Robust distribution planning for supplier-managed inventory agreements when demand rates and travel times are stationary

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  • E-H Aghezzaf

    (University of Ghent)

Abstract

Supplier-managed inventory (SMI) is a partnering agreement between a supplier and his customers. Under this SMI agreement, inventory monitoring and ordering responsibilities are entirely transferred to the supplier. Subsequently, the supplier decides both the quantity and timing of his customer deliveries. The inventory routing problem is an underlying optimization model for SMI partnerships to cost-effectively coordinate and manage customer inventories and related replenishments logistics. This paper discusses the case where customer demand rates and travel times are stochastic but stationary, and proposes a version of the inventory routing optimization model that generates optimal robust distribution plans. The approach proposed to obtain and deploy these robust plans combines optimization and Monte Carlo simulation. Optimization is used to determine the robust distribution plan and simulation is used to fine-tune the plan's critical parameters such as replenishment cycle times and safety stock levels. Results of a simplified real-life case implementing the proposed optimization-simulation approach are shown and discussed in detail.

Suggested Citation

  • E-H Aghezzaf, 2008. "Robust distribution planning for supplier-managed inventory agreements when demand rates and travel times are stationary," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(8), pages 1055-1065, August.
    • Handle: RePEc:pal:jorsoc:v:59:y:2008:i:8:d:10.1057_palgrave.jors.2602444
    DOI: 10.1057/palgrave.jors.2602444
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    References listed on IDEAS

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    Cited by:

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    2. Michelle Blom & Slava Shekh & Don Gossink & Tim Miller & Adrian R Pearce, 2020. "Inventory routing for defense: Moving supplies in adversarial and partially observable environments," The Journal of Defense Modeling and Simulation, , vol. 17(1), pages 55-81, January.
    3. Agostinho Agra & Marielle Christiansen & Lars Magnus Hvattum & Filipe Rodrigues, 2018. "Robust Optimization for a Maritime Inventory Routing Problem," Transportation Science, INFORMS, vol. 52(3), pages 509-525, June.
    4. Oğuz Solyalı & Jean-François Cordeau & Gilbert Laporte, 2012. "Robust Inventory Routing Under Demand Uncertainty," Transportation Science, INFORMS, vol. 46(3), pages 327-340, August.
    5. Markov, Iliya & Bierlaire, Michel & Cordeau, Jean-François & Maknoon, Yousef & Varone, Sacha, 2018. "A unified framework for rich routing problems with stochastic demands," Transportation Research Part B: Methodological, Elsevier, vol. 114(C), pages 213-240.
    6. Mohd Kamarul Irwan Abdul Rahim & El-Houssaine Aghezzaf & Veronique Limère & Birger Raa, 2016. "Analysing the effectiveness of vendor-managed inventory in a single-warehouse, multiple-retailer system," International Journal of Systems Science, Taylor & Francis Journals, vol. 47(8), pages 1953-1965, June.
    7. Leandro C. Coelho & Jean-François Cordeau & Gilbert Laporte, 2014. "Thirty Years of Inventory Routing," Transportation Science, INFORMS, vol. 48(1), pages 1-19, February.

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