An Integrated Inventory-Routing and Working Capital Requirement Model for a Two-Echelon Supply Chain

Abstract

In a context of economic volatility, multiple crises, and growing environmental concerns, the optimization of physical and financial flows has become imperative for businesses. In a classical Inventory Routing Problem (IRP), only the physical flow of goods is considered. This paper introduces a link between a two-echelon Inventory Routing Problem and the financial flows of the Working Capital Requirement, where the products are dispatched from warehouses to fulfill customer demand. We propose a two Echelon Inventory Routing Problem under Working Capital Requirement (2E-IRP-WCR) model which allows us to evaluate the integration of physical and financial flows so as to further reduce the total cost, where the total cost consisting of ordering and inventory costs, transportation costs and financial costs. Numerical tests, established for multi-suppliers, multi-warehouses, multi-customers, single-product and finite capacity cases, are presented to demonstrate the pertinence of our approach.