PhD ceremony Mr. H.W. Bouma: The routed inventory pooling problem

PhD ceremony: Mr. H.W. Bouma

Dissertation: The routed inventory pooling problem

Promotor(s): prof. R.H. Teunter

Faculty: Economics and Business

Both inventories and transportation account for considerable costs in supply chains. Therefore, techniques and concepts that minimize these costs have been object of study for many decades. Two popular research areas are Inventory Routing, in which the goal is to find optimal replenishment routes along a set of multiple customers, and Inventory Pooling, in which inventory is pooled among several stock points in order to minimize total inventory levels and costs. We consider a combined Inventory Pooling and Routing Problem, in which items are pooled via lateral transshipments. Due to the complexity of the problem, we assume that the lateral transshipments follow a fixed route and solve the resulting Routed Inventory Pooling Problem (RIPP).

Since no results are known on the RIPP, we start with a single item, single period inventory model with two or three retailers. Once during the period the stock levels are balanced by lateral transshipments. We derive exact cost expressions which can be solved numerically, and we derive some interesting analytical results. We compare the outcomes of the experiments to benchmark instances in which pooling is not allowed and in which there is no restriction on the route for redistribution (complete pooling). Furthermore, we present a Dynamic Programming formulation for a scenario with multiple lateral transshipments. Our main find is that the routed pooling policy is a good alternative to the complete pooling policy as it captures most of the cost benefits of pooling. This is especially so if costs of transportation are not too large.