Multi-item inventory-routing problem for an FMCG company

Thesis Type: Postgraduate

Institution Of The Thesis: Orta Doğu Teknik Üniversitesi, Faculty of Engineering, Department of Industrial Engineering, Turkey

Approval Date: 2007


Supervisor: ÖMER KIRCA


In this study, inventoryrouting system of a company operating in Fast Moving Consumer Goods (FMCG) industry is analyzed. The company has decided to redesign distribution system by locating regional warehouses between production plants and customers. The warehouses in the system are all allowed to hold stock without any capacity restriction. The customers are replenished by the warehouse to which they have been assigned. Customer stocks are continuously monitored by the warehouse and deliveries are to be scheduled. In this multiitem, two-echelon inventorydistribution system, main problem is synchronizing inventory and distribution decisions. An integrated Mixed Integer Programming optimization model for inventory and distribution planning is proposed with the aim of optimally coordinating inventory management and vehicle routing. The model determines the replenishment periods of items and amount of delivery to each customer; and constructs the delivery routes with the objective of cost minimization. The integrated model is coded in GAMS and solved by CPLEX. The integrated inventory-routing model is simulated with retrospective data of the company. Computational results on test problems are provided to show the effectiveness of the model developed in terms of the performance measures defined. Moreover, the feasible solution obtained for a period is compared to the realized inventory levels and distribution schedules. Computational results seem to indicate a substantial advantage of the integrated inventory-routing system over the existing distribution system.