A Decomposition Approach to the Inventory Routing Problem with Satellite Facilities

This paper presents a comprehensive decomposition scheme for solving the inventory routing problem in which a central supplier must restock a subset of customers on an intermittent basis. In this setting, the customer demand is not known with certainty and routing decisions taken over the short run might conflict with the long-run goal of minimizing annual operating costs. A unique aspect of the short-run subproblem is the presence of satellite facilities where vehicles can be reloaded and customer deliveries continued until the closing time is reached. Three heuristics have been developed to solve the vehicle routing problem with satellite facilities (randomized Clarke-Wright, GRASP, modified sweep). After the daily tours are derived, a parametric analysis is conducted to investigate the tradeoff between distance and annual costs. This leads to the development of the efficient frontier from which the decision maker is free to choose the most attractive alternative. The proposed procedures are tested on data sets generated from field experience with a national liquid propane distributor.