Multi-Product Inventory Location-Routing Problem with Shortages

The companies, who wants to adapt to the changed market conditions and remain competitive, have to manage their storage and distribution processes in a cost effective manner as well as their production processes. The logistic costs consume a significant part of the budget of the companies and therefore these processes must be managed as efficiently as possible. The design of such an effective logistic network contains two hard combinatorial optimization problems, to locate facilities, and to determine vehicle routes supplying demand points from these locations. Within the context of this study, we deal with the Location Inventory Routing Problem (LIRP), which is an enriched Location Routing Problem (LRP) with the inventory related issues and determines inventory, location and transportation related decisions at the strategic, tactical and operational levels. A mathematical model, a combination of a location-routing problem and a joint replenishment economic order quantity (EOQ) model with backorders, is developed to formally describe the problem. Large neighborhood search algorithm is developed to solve the problem. Comparative results with the location-routing problem data sets from the literature is used in order to evaluate solution method. The best known results in the literature have been found or the best results have been approached for both problem dataset