Combining service frequency and vehicle routing for managing supplier shipments
Institution:
1. Southwest Jiaotong University, School of Mechanical Engineering, Chengdu, 610031, PR China;2. Friedrich-Schiller-Universität Jena, Lehrstuhl für Operations Management, Carl-Zeiss-Str. 3, Jena, 07743, Germany
Abstract:
This paper proposes a new approach to designing inbound material collection routes that considers pick-up frequency and spatial design as joint decisions to minimize total logistics (transportation plus inventory) cost. The clustering-based optimization uses an approximation to the actual cost of a routing solution without actual route construction. We show that the problem is analogous to a single-source fixed-charge facility location problem, and near-optimal solutions can be found using an efficient heuristic algorithm. Tests show the effectiveness of how this model is formulated and a case study demonstrates that substantial total cost savings can be achieved in realistic applications.