Optimizing the moment of customer delivery in ORTEC Inventory Routing

Inventory Routing is a Vendor Managed Inventory solution that minimizes the long-term costs involved in distributing a product to multiple customers, while preventing stock-outs at those customers. In this thesis we aim to identify opportunities to improve the selection criteria used by OIR to decide on a day by day basis which customers to deliver to. Currently this decision is integrated in the construction of the routes by using the daily cost per volume as a short-term objective to minimize the total cost per volume over the horizon. First, we design two short-term solution approaches that aim to minimize the daily cost per volume without constructing the delivery routes. We find that the daily cost per volume is not always a good indicator of the total cost per volume, but that a method incorporating a capacitated minimum spanning tree nevertheless shows promising results. Second, we design alternative short-term objectives and examine their effect on the long-term objective. In doing so we find that optimizing the cost per volume of each delivery to a customer gives better results than optimizing the cost per volume of each day or each route.