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Deliveries in an Inventory/Routing Problem Using Stochastic Dynamic Programming

Author

Listed:
  • Oded Berman

    (Joseph L. Rotman School of Management, University of Toronto, Toronto, Ontario, Canada M5S 3E6)

  • Richard C. Larson

    (Center for Advanced Educational Services, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

Abstract

An industrial gases tanker vehicle visits n customers on a tour, with a possible ( n + 1)st customer added at the end. The amount of needed product at each customer is a known random process, typically a Wiener process. The objective is to adjust dynamically the amount of product provided on scene to each customer so as to minimize total expected costs, comprising costs of earliness, lateness, product shortfall, and returning to the depot nonempty. Earliness costs are computed by invocation of an annualized incremental cost argument. Amounts of product delivered to each customer are not known until the driver is on scene at the customer location, at which point the customer is either restocked to capacity or left with some residual empty capacity, the policy determined by stochastic dynamic programming. The methodology has applications beyond industrial gases.

Suggested Citation

  • Oded Berman & Richard C. Larson, 2001. "Deliveries in an Inventory/Routing Problem Using Stochastic Dynamic Programming," Transportation Science, INFORMS, vol. 35(2), pages 192-213, May.
  • Handle: RePEc:inm:ortrsc:v:35:y:2001:i:2:p:192-213
    DOI: 10.1287/trsc.35.2.192.10134
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    References listed on IDEAS

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    1. T. William Chien & Anantaram Balakrishnan & Richard T. Wong, 1989. "An Integrated Inventory Allocation and Vehicle Routing Problem," Transportation Science, INFORMS, vol. 23(2), pages 67-76, May.
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    3. Cárdenas-Barrón, Leopoldo Eduardo & González-Velarde, José Luis & Treviño-Garza, Gerardo & Garza-Nuñez, Dagoberto, 2019. "Heuristic algorithm based on reduce and optimize approach for a selective and periodic inventory routing problem in a waste vegetable oil collection environment," International Journal of Production Economics, Elsevier, vol. 211(C), pages 44-59.
    4. Woonghee Tim Huh & Retsef Levi & Paat Rusmevichientong & James B. Orlin, 2011. "Adaptive Data-Driven Inventory Control with Censored Demand Based on Kaplan-Meier Estimator," Operations Research, INFORMS, vol. 59(4), pages 929-941, August.
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    8. Daniel Adelman, 2004. "A Price-Directed Approach to Stochastic Inventory/Routing," Operations Research, INFORMS, vol. 52(4), pages 499-514, August.
    9. Patrick Jaillet & Jonathan F. Bard & Liu Huang & Moshe Dror, 2002. "Delivery Cost Approximations for Inventory Routing Problems in a Rolling Horizon Framework," Transportation Science, INFORMS, vol. 36(3), pages 292-300, August.
    10. Yves Crama & Mahmood Rezaei & Martin Savelsbergh & Tom Van Woensel, 2018. "Stochastic Inventory Routing for Perishable Products," Transportation Science, INFORMS, vol. 52(3), pages 526-546, June.
    11. Markov, Iliya & Bierlaire, Michel & Cordeau, Jean-François & Maknoon, Yousef & Varone, Sacha, 2018. "A unified framework for rich routing problems with stochastic demands," Transportation Research Part B: Methodological, Elsevier, vol. 114(C), pages 213-240.
    12. Sonntag, Danja R. & Schrotenboer, Albert H. & Kiesmüller, Gudrun P., 2023. "Stochastic inventory routing with time-based shipment consolidation," European Journal of Operational Research, Elsevier, vol. 306(3), pages 1186-1201.
    13. Robert W. Lien & Seyed M. R. Iravani & Karen R. Smilowitz, 2014. "Sequential Resource Allocation for Nonprofit Operations," Operations Research, INFORMS, vol. 62(2), pages 301-317, April.
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