Inventory control problem of a single warehouse and a multi-retailer distrbution system (a case of Chocho Industry)

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In many distribution systems important cost reductions and/or service improvements may be achieved by adopting efficient inventory replenishment strategies for all items and facilities concerned. Such strategies often need to exploit economies of scale that arise e.g. when shipping full (or close to full) rail loads or truck loads of goods. The latter can often only be achieved by combining deliveries to distinct locations into efficient routes. These efficiency improvements and service enhancements clearly require an integrated approach towards various logistical planning functions; in particular the areas of inventory control and transportation planning need to be closely coordinated; for example, shipping in smaller quantities and with higher frequency generally leads to reductions in inventory investments but requires additional transportation costs. In this thesis we considered distribution systems with a single depot and many geographically dispersed retailers each of which faces a specific demand process for a given item. All stock enters the system through the depot from where it is distributed to (some of) the retailers by a fleet of trucks, combining deliveries into efficient routes. Our objective is to determine long-term integrated replenishment strategies (i.e., inventory rules and routing patterns) enabling all retailers to meet their demands while minimizing long-run average system-wide transportation and inventory costs. We applied Route First Cluster Second approach to determine feasible replenishment strategies (i.e., inventory rules and routing patterns) minimizing (infinite horizon) long-run average transportation and inventory costs. A numerical study exhibits the performance of these heuristics and reduced the distribution cost of the company drastically
A thesis submitted to the Department of Mathematics, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirement for the award of degree of Master of Science Industrial Mathematics, 2013