Robust Inventory Routing Problem: Case of Oxfam

(27-03-2007)

Vendor-Managed Inventory (VMI) is a partnering agreement, between a vendor and his customers, allowing the vendor to take the inventory replenishment decisions for his customers. Under this agreement, the vndor monitors the inventory levels of his customers and makes all re-supply decisions related to the size and timing of deliveries. The inventory routing problem (IRP) is an underlying optimization model for VMI partnerships to cost-effectively coordinate and manage customer inventories and related replenishments logistics.

We studied the case where customer-demand rates are constant and when they are stochastic but stationary, and proposed versions of the inventory-routing optimization model that generates optimal robust distribution plans. The approach proposed combines optimization and Monte Carlo simulation. Results of a simplified real-life case implementing the proposed optimization-simulation approach are obtained. For more information, contact E.-H. Aghezzaf.