Optimizing Vendor-Managed Inventory in Multi-Tier Distribution Systems

Ibrahim Badi; Mouhamed Bayane  Bouraima; Željko Stević; Elizabeth Abosede Oloketuyi; Opeyemi Oluyemisi Makinde

doi:10.31181/sor1120243

Authors

Ibrahim Badi Mechanical Engineering Department, Libyan Academy, Misrata, Libya Author
Mouhamed Bayane Bouraima Department of Civil Engineering, Sichuan College of Architectural Technology, Deyang, 618000, China Author
Željko Stević Department of Mobile Machinery and Railway Transport, Vilnius Gediminas Technical University, Lithuania Author
Elizabeth Abosede Oloketuyi Organization of African Academic Doctors (OAAD), Off Kamiti Road, P.O Box 25305-00100, Nairobi, Kenya Author
Opeyemi Oluyemisi Makinde Department of Civil Engineering Technology, Rufus Giwa Polytechnic, Owo, Ondo State, Nigeria Author

DOI:

https://doi.org/10.31181/sor1120243

Keywords:

Vendor Managed Inventory, Routing Problem, Nearest Neighbor Algorithm, Stem Distance, Insertion Heuristics

Abstract

This paper addresses the concept of the vendor-managed inventory (VMI) problem, focusing on the replenishment policy and the vehicle routing problem (VRP) model. These components are integrated to tackle a three-echelon distribution issue comprising a single plant, multiple depots, and multiple retailers, with the primary objective of minimizing transportation and inventory costs within this complex distribution network. A three-phase methodology is proposed to optimize the entire supply chain, from the plant to the final retailer, and its performance is evaluated through computational experiments. This research is motivated by a real-life supply network, highlighting its practical relevance and applicability. To extend the capabilities of existing methods for solving the combined inventory and routing problem, an insertion heuristic is incorporated to enhance vehicle utilization, thereby reducing total costs. Computational results demonstrate the effectiveness of the improved algorithm, indicating that it is sufficiently robust for practical application. Significant cost savings can be achieved with the proposed approach, making it a valuable contribution to the field of supply chain optimization.

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