Inventory routing when it matters

Yesterday we had the pleasure of welcoming Prof. Leandro C. Coelho for a research seminar at the Forac research consortium. He presented his work on the inventory routing problem (IRP) which is a combination between the vehicle routing problem (VRP) and inventory management problems. Leandro is a very prolific writer, with many research contributions on both algorithmic and modeling aspects. His presentation renewed my interest about routing problems. Leandro CC Seminar

It´s tempting to see the IRP as yet-another-variant of the very popular VRP.  In his seminar, Leandro made a very good case about why Inventory arouting Problems (IRP) matter. He pointed out that though not every published paper on IRP works on cases brought up by real companies, but many algorithms proposed for the IRP are versatile enough to be applied to industrial problems. Among the examples he cited:

  • Automated cash terminals (ATMs) need to be replenished regularly. In some countries such as the Netherlands, some atms have the ability to directly handle deposited bills and put them back right into circulation. Optimizing the replenishment schedule could yield saving of up to 10 million euros a year.
  • Olive oil collection from harvesters in Tunisia is also quite important and complex. Olive oil comes in different quality levels, and it is very important for high-quality oil not to come in contact with lower quality oil. When a vehicle compartment or tank has been used to carry a lower-quality oil, it needs to be cleaned before it can be used to transport higher-quality grade oil.
  • There are also other considerations besides inventory and routing costs. In one application – the production and delivery of custom-made guitars – the company has the opportunity to balance logistics costs with cash flow issues.

Another good news related to this these applications is that there are plenty of opportunities to help real companies by applying this OR. Implementing these algorithms into enterprise software however requires lots of work (programming, modeling, customizing, training, documenting), but the algorithms to solve the problems are already there. This is a great opportunity for those skilled in operations research who don’t want to spend their lives implementing Cplex callbacks in C or C++.

I really enjoyed Leandro’s seminar, and I think the people at Forac enjoyed it too!

(I must also say I was inspired to do this blog post after seeing Laura McLay  and Michael Trick‘s mutual blog posts about their plenaries a the #or2014 conference.)

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