The inventory-routing problem with transshipment

This paper introduces the Inventory-Routing Problem with Transshipment (IRPT). This problem arises when vehicle routing and inventory decisions must be made simultaneously, which is typically the case in vendor-managed inventory systems. Heuristics and exact algorithms have already been proposed for the Inventory-Routing Problem (IRP), but these algorithms ignore the possibility of performing transshipments between customers so as to further reduce the overall cost. We present a formulation that allows transshipments, either from the supplier to customers or between customers. We also propose an adaptive large neighborhood search heuristic to solve the problem. This heuristic manipulates vehicle routes while the remaining problem of determining delivery quantities and transshipment moves is solved through a network flow algorithm. Our approach can solve four different variants of the problem: the IRP and the IRPT, under maximum level and order-up-to level policies. We perform an extensive assessment of the performance of our heuristic.