Optimizing the inventorying and distribution of chemical fluids: An innovative nested column generation approach

Abstract

Vendor-managed-inventory is a successful business practices based on the cooperation between a supplier and its customers in which demand and inventory information from the customers are shared with the supplier. This practice is gaining popularity in the chemical industry and relies on the inventory-routing-problem, which integrates inventory management, vehicle routing, and delivery scheduling decisions. This one is a difficult combinatorial optimization problem both theoretically and practically. However, because of the large expenses involved in distribution and inventorying of chemical products, it is attractive to make use of optimization tools for exploiting as many degrees of freedom as possible with the goal of minimizing both distribution and inventorying costs. Consequently, we propose a nested column generation algorithm for solving an inventorying and distribution problem that models the delivery of several chemicals fluids. The approach is building on a column generation & incomplete branch-and-price algorithm in which for each delivery route, the delivery patterns of fluids are also determined by column generation. We detail the implementation and provide computational results for realistic test instances.