Inventory Routing Investigations

To my wife, for her love and patience. iii ACKNOWLEDGEMENTS I would like to express my deepest appreciation to Dr. Martin Savelsbergh for serving as my thesis advisor, and providing invaluable advice and support. There is no way that I could have completed this thesis without his excellent insights, invaluable suggestions, and endless encouragement. C. White III for serving as members of my committee. Words are insufficient to express how much I owe to my families. My parents have always been there to encourage me. They have never doubted that I could do anything. Their endless love is the source of my courage. I want to thank my parents-in-law for their support and encouragement. My many thanks also to my sisters, sister-in-law, brothers-in-law, and nieces for their love. I owe special thanks to my wife, Se-kyoung Oh. Her support, patience, and love enabled me to complete this thesis. SUMMARY The elimination of distribution inefficiencies, occurring due to the timing of customers' orders is an important reason for companies to introduce vendor managed inventory programs. By managing their customers' inventories, suppliers may be able to reduce demand variability and therefore distribution costs. We develop technology to measure the effectiveness of distribution strategies. Popular practical performance measures, such as volume delivered per mile, are effective in measuring relative performance, but inadequate to measure absolute performance. We develop a methodology that allows the computation of tight lower bounds on the total mileage required to satisfy customer demand over a period of time. As a result, companies will be able to gain insight into the effectiveness of their distribution strategy. This technology can also be used to suggest desirable delivery patterns and to analyze tactical and strategic decisions. Secondly, we study a variant of the inventory routing problem, which we will refer to here as the inventory routing problem with continuous moves (IRP-CM). The typical inventory routing problem deals with the repeated distribution of a single product, from a single facility, with an unlimited supply, to a set of customers that can all be reached with out-and-back trips. Unfortunately, this is not always the reality. We introduce the IRP-CM to study two important real-life complexities: limited product availabilities at facilities and customers that cannot be served using out-and-back tours. We need to design delivery tours spanning several days, covering huge geographic areas, and involving product pickups at different facilities. We develop a heuristic and …