Direct shipping and the dynamic single-depot/multi-retailer inventory system

Direct shipping and the dynamic single-depot/multi-retailer inventory system

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Article ID: iaor19991548
Country: Netherlands
Volume: 101
Issue: 3
Start Page Number: 509
End Page Number: 518
Publication Date: Sep 1997
Journal: European Journal of Operational Research
Authors: ,
Keywords: vehicle routing & scheduling
Abstract:

In this paper we study a single-depot/multi-retailer system with independent stochastic stationary demands, linear inventory costs, and backlogging at the retailers over an infinite horizon. In addition, we also consider the transportation cost between the depot and the retailers. Orders are placed each period by the depot. The orders arrive at the depot and are allocated and delivered to the retailers. No inventory is held at the depot. We consider a specific policy of direct shipments. That is, a lower bound on the long run average cost per period for the system over all order/delivery strategies is developed. The simulated long term average cost per period of the delivery strategy of direct shipping with fully loaded trucks is examined via comparison to the derived lower bound. Simulation studies demonstrate that very good results can be achieved by a direct shipping policy.

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