Solving a vendor-managed inventory routing problem arising in the distribution of bottled water in Morocco

Abstract

In this paper we solve a real-life distribution problem faced by a Moroccan bottled water company dealing with a combination of inventory and distribution decisions. To manage its distribution process, the company uses a vendor-managed inventory system, which means that the supplier controls the inventory at the customers. This problem is known as the inventory-routing problem (IRP) in which both transportation and inventory costs are simultaneously minimised. Our real-life problem contains several types of bottled water that must be shipped from a supplier to a set of regional depots and wholesalers. Inventory costs are paid at both the plant and at the customers, and shipments are performed by a fleet of homogeneous vehicles. We propose an ad-hoc modification of IRP models and branch-and-cut algorithms. Computational tests were carried out on fifteen real-life-based instances. The results show that significant savings of almost 10% can be obtained. [Received 20 March 2016; Revised 21 August 2016; Accepted 10 September 2016]