Coordinating inventory management and transportation decisions in a third-party logistics distribution network

We consider a distribution network that integrates supply, storage, and transportation activities, seeking to examine how coordinating inventory and transportation decisions affects performance. We hypothesise that via the coordination of inventory and transportation decisions, the distribution network could succeed substantial cost savings and im- proved service levels. We develop an optimisation model that supports replenishment decisions in order to deliver products on time and meet customer demand, utilising an existing warehouse network and a fleet of vehicles. Furthermore, we consider the distribution network as a dynamic environment in which several conditions can change affecting the cost structures, demand and time constraints, thus the optimal replenishment decisions. Our results indicate that the computation time is reasonable for the requirements of this business problem. As a result, the proposed model is flexible to determine new strategies, allowing immediate actions. The proposed work is evaluated through a case study in a third-part logistics distribution network in China.