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Stochastic Inventory Routing: Route Design with Stockouts and Route Failures

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  • Pierre Trudeau

    (ADOPT, Montréal, Québec, Canada)

  • Moshe Dror

    (Decisions Sciences, College of Business, The University of Arizona, Tucson, Arizona 85721 and CRT, Universite de Montréal, Montréal, Québec, Canada)

Abstract

The stochastic inventory routing problem involves the distribution of a commodity such as heating oil over a long period of time to a large set of customers. The customers maintain a local inventory of the commodity which they consume at a daily rate. Their consumption varies daily and seasonally and their exact demand is known only upon the arrival of the delivery vehicle. This paper presentes a detailed analysis of this problem incorporating the stochastic nature of customers' consumptions and the possibility of route failures when the actual demand on a route exceeds the capacity of a vehicle. A number of solution procedures are compared on a large set of real life data for a period of 12 consecutive weeks. The winning strategy, though computationally more expensive, provides the best system performance and reduces (almost eliminates) the stockout phenomena.

Suggested Citation

  • Pierre Trudeau & Moshe Dror, 1992. "Stochastic Inventory Routing: Route Design with Stockouts and Route Failures," Transportation Science, INFORMS, vol. 26(3), pages 171-184, August.
    • Handle: RePEc:inm:ortrsc:v:26:y:1992:i:3:p:171-184
    DOI: 10.1287/trsc.26.3.171
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