An integrated model for warehouse and inventory planning

We propose a tactical model which integrates the replenishment decision in inventory management, the allocation of products to warehousing systems and the assignment of products to storage locations in warehousing management. The purpose of this article is to analyse the value of integrating warehouse and inventory decisions. This is achieved by proposing two methods for solving this tactical integrated model which differ in the level of integration of the inventory and warehousing decisions. A computational analysis is performed on a real world database and using multiple scenarios differing by the warehouse capacity limits. Our observation is that the total cost of the inventory and warehousing systems can be reduced drastically by taking into account the warehouse capacity restrictions in the inventory planning decisions, in an aggregate way. Moreover additional inventory and warehouse savings can be achieved by using more sophisticated integration methods for inventory and warehousing decisions.