Strategic fleet sizing problem in a vendor managed inventory system with predetermined delivery frequencies; a fix and optimize heuristic

Abstract

Logistics related costs constitute a major part in the total cost of a product, and fleet management is an important managerial function to control this cost component. In this study, as a relevant problem to fleet management, we have analyzed an integrated fleet sizing and replenishment planning problem in a vendor managed inventory system. In the problem, we assume that there is a set of customers to be replenished based on a given set of predetermined frequencies, for a single item. We have candidate vehicles with different capacities and cost parameters in the problem, such as ownership costs and per kilometer fuel costs. Customer demands are considered as deterministic and constant values. The main decision we make in the problem is the triple assignment of vehicle-frequency-customer. As a result of these assignment decisions, we obtain an annual cost consisting of vehicle ownership cost, routing cost, inventory holding, and fixed replenishment costs. We suggested a model for the problem and suggested a fix and optimize type heuristic solution approach. We have shown the performance of the heuristic on a set of randomly generated problems. © 2018 Institute of Industrial Engineers (IIE). All rights reserved.