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A Periodic Inventory Routing Problem at a Supermarket Chain

Leonard N. Stern School of Business, New York University, New York, New York 10012
The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104-6340
vgaur{at}stern.nyu.edu
fisher{at}wharton.upenn.edu

Albert Heijn, BV, a supermarket chain in the Netherlands, faces a vehicle routing and delivery scheduling problem once every three to six months. Given hourly demand forecasts for each store, travel times and distances, cost parameters, and various transportation constraints, the firm seeks to determine a weekly delivery schedule specifying the times when each store should be replenished from a central distribution center, and to determine the vehicle routes that service these requirements at minimum cost. We describe the development and implementation of a system to solve this problem at Albert Heijn. The system resulted in savings of 4% of distribution costs in its first year of implementation and is expected to yield 12%–20% savings as the firm expands its usage. It also has tactical and strategic advantages for the firm, such as in assessing the cost impact of various logistics and marketing decisions, in performance measurement, and in competing effectively through reduced lead time and increased frequency of replenishment.

Subject classifications: inventory; inventory routing; networks; matchings; application to inventory routing; transportation; vehicle routing; algorithm and implementation.
History: Received October 2001; accepted November 2003.

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