Stochastic periodic review model of a multi retailer inventory routing problem
Abstract
This paper evaluates a periodic replenishment policy for a single product in a multiple retailer scenario with stochastic demands. Customer demands are assumed to be independent and identically distributed. We study the impact of Inventory Routing flexibility on the inventory and transportation costs. The flexibility gives the supplier an opportunity to make early replenishments to the retailers. Joint replenishments can be made to a retailer when his inventory falls below the “can” delivery level. Specifically, we will investigate the impact of flexibility on inventory and transportation costs by varying the “order up to level” and the “must” delivery level at the retailers with different demand distribution settings. A design of experiment is conducted using the Taguchi Method, and the analysis is performed through simulation using a spreadsheet. The results show how the different “order up level”, “must” delivery level and “can” delivery level affect the costs in the system.