Two-stage inventory models with a bi-modal transportation cost

Authors:
B. Q. Rieksts;José A. Ventura
Affiliations:
Institute for Defense Analyses, Cost Analysis and Research Division, 4850 Mark Center Drive, Alexandria, VA 22302, USA;Harold and Inge Marcus Department of Industrial and Manufacturing Engineering, The Pennsylvania State University, University Park, PA 16802, USA
Venue:
Computers and Operations Research
Year:
2010

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Abstract

This paper discusses inventory models over an infinite planning horizon with constant demand rate and two modes of transportation. These transportation options include truckloads and a less than truckload carrier. An optimal algorithm is derived for a one-warehouse one-retailer system. A power-of-two heuristic algorithm is also proposed for a one-warehouse multi-retailer system. Computational results are provided to show that, on the average, the heuristic algorithm is at least 94% effective.