Integrated inventory and transport optimisation in multi-retailer supply chains
Mustaffa, Noorfa Haszlina
This thesis studies the Inventory Routing Problem (IRP) consisting of one supplier and multiple retailers who face a stochastic demand that is assumed to be independently and identically distributed over an infinite planning horizon. The aim of the study is to examine the impact of flexibility that is generated from the opportunity of the supplier to make an early replenishment in order to consolidate the replenishment between retailers and the integration of efficient routing strategies that optimise the cost and vehicle energy consumption besides generating high vehicle effectiveness. The study also aims to evaluate the potential of the IRP model as a business process reengineering strategy in the context of private healthcare industry in Malaysia. One of the leading private healthcare organizations that owns a chain of clinics in Malaysia is used to examine to explore typical supply chain process leading to practical contextualization of an IRP model. The new IRP model is proposed based on (s,c,S) policy to evaluate the trade-off between inventory cost and transportation cost. The analysis, based on a spreadsheet simulation model, numerically evaluates the performance of the proposed IRP model using different vehicle effectiveness strategies including the Travelling Salesman Problem (TSP) approach, the Overall Vehicle Effectiveness (OVE) and Modified Overall Vehicle Effectiveness (MOVE) metrics. Results showed the proposed periodic can-deliver model provides a significant cost saving compared to the common inventory control policy, (s,S) and a slight additional marginal benefit compared to the (s,S-1,S) policy. The findings also indicate that the MOVE metric consistently outperformed the OVE metric and TSP approach which determines the delivery sequence that generates high vehicle effectiveness which in return minimises the cost, vehicle distance travelled, and vehicle energy consumed. An appropriate inventory policy together with an appropriate routing policy is crucial in the IRP approach. Integration of flexible inventory control policies with the MOVE metrics leads to minimised operating costs and low vehicle energy consumption as well as improving total vehicle effectiveness.
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