A Decomposition Approach for the Inventory-Routing Problem

Authors:
Ann Melissa Campbell;Martin W. P. Savelsbergh
Affiliations:
Management Sciences Department, Tippie College of Business, University of Iowa, Iowa City, Iowa 52242;School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, Georgia 30332-0205
Venue:
Transportation Science
Year:
2004

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Abstract

In this paper, we present a solution approach for the inventory-routing problem. The inventory-routing problem is a variation of the vehicle-routing problem that arises in situations where a vendor has the ability to make decisions about the timing and sizing of deliveries, as well as the routing, with the restriction that customers are not allowed to run out of product. We develop a two-phase approach based on decomposing the set of decisions: A delivery schedule is created first, followed by the construction of a set of delivery routes. The first phase utilizes integer programming, whereas the second phase employs routing and scheduling heuristics. Our focus is on creating a solution methodology appropriate for large-scale real-life instances. Computational experiments demonstrating the effectiveness of our approach are presented.