Journal
INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS
Volume 135, Issue 2, Pages 754-761Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.ijpe.2011.10.008
Keywords
Vendor managed inventory; Multi-echelon inventory management; Facility location; Set-packing; Branch-and-price
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Funding
- National Natural Science Foundation of China [70801014, 71171047, 71071074, 71071033]
- University of China [NCET-09-0292]
- Natural Science Foundation of Jiangsu [BK2011541]
- MOE (Ministry of Education in China) [11YJCZH188]
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In this paper, we study a logistics network design problem with vendor managed inventory in which the company is in charge of managing inventory for its downstream warehouses and retailers, and can choose whether to satisfy each retailer's demand. The problem incorporates the location, transportation, pricing, and warehouse-retailer echelon inventory replenishment decisions. Traditionally, these decisions are made separately. We formulate the problem as a set-packing model and solve it using branch-and-price. The pricing problem that arises from each iteration of the column generation procedure is an interesting nonlinear IP problem. We show the pricing problem can be solved in O(n(2) log n) time for each warehouse, where n is the number of retailers. The computational results shed insights on the benefits that the integrated approach can achieve significant profit improvement. The computational results also highlight the efficiency of the solution algorithm. (C) 2011 Elsevier B.V. All rights reserved.
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