Production, replenishment and inventory policies for perishable products in a two-echelon distribution network

Abstract

The research on production, delivery and inventory strategies for perishable products in a two-echelon distribution network integrates the production routing problem (PRP) and two-echelon vehicle routing problem (2E-VRP), which mainly considers the inventory and delivery sustainability of perishable products. The problem investigated in this study is an extension of the basic problems, and it simultaneously optimizes production, replenishment, inventory, and routing decisions for perishable products that will deteriorate over the planning horizon. Additionally, the lead time has been considered in the replenishment echelon, and the unit inventory cost varying with the inventory time is considered in the inventory management. Based on a newly designed model, different inventory strategies are discussed in this study: old first (OF) and fresh first (FF) strategies both for the first echelon and second echelon, for which four propositions to model them are proposed. Then, four valid inequalities, including logical inequalities, a (l, S, WW) inequality, and a replenishment-related inequality, are proposed to construct a branch-and-cut algorithm. The computational experiments are conducted to test the efficiency of valid inequalities, branch-and-cut, and policies. Experimental results show that the valid inequalities can effectively increase the relaxed lower bound by 4.80% on average and the branch-and-cut algorithm can significantly reduce the computational time by 58.18% on average when compared to CPLEX in small and medium-sized cases. For the selection of strategy combinations, OF-FF is suggested to be used in priority.