Virtual transshipments and revenue-sharing contracts in supply chain management

This dissertation presents the use of virtual transshipments and revenue-sharing contracts for inventory control in a small scale supply chain. The main objective is to maximize the total profit in a centralized supply chain or maximize the supply chain\u27s profit while keeping the individual components\u27 incentives in a decentralized supply chain. First, a centralized supply chain with two capacitated manufacturing plants situated in two distinct geographical regions is considered. Normally, demand in each region is mostly satisfied by the local plant. However, if the local plant is understocked while the remote one is overstocked, some of the newly generated demand can be assigned to be served by the more remote plant. The sources of the above virtual lateral transshipments, unlike the ones involved in real lateral transshipments, do not need to have nonnegative inventory levels throughout the transshipment process. Besides the theoretical analysis for this centralized supply chain, a computational study is conducted in detail to illustrate the ability of virtual lateral transshipments to reduce the total cost. The impacts of the parameters (unit holding cost, production cost, goodwill cost, etc.) on the cost savings that can be achieved by using the transshipment option are also assessed. Then, a supply chain with one supplier and one retailer is considered where a revenue-sharing contract is adopted. In this revenue-sharing contract, the retailer may obtain the product from the supplier at a less-than-production-cost price, but in exchange, the retailer must share the revenue with the supplier at a pre-set revenuesharing rate. The objective is to maximize the overall supply chain\u27s total profit while upholding the individual components\u27 incentives. A two-stage Stackelberg game is used for the analysis. In this game, one player is the leader and the other one is the follower. The analysis reveals that the party who keeps more than half of the revenue should also be the leader of the Stackelberg game. Furthermore, the adoption of a revenue-sharing contract in a supply chain with two suppliers and one retailer under a limited amount of available funds is analyzed. Using the revenue-sharing contract, the retailer pays a transfer cost rate of the production cost per unit when he obtains the items from the suppliers, and shares the revenue with the suppliers at a pre-set revenue-sharing rate. The two suppliers have different transfer cost rates and revenue-sharing rates. The retailer will earn more profit per unit with a higher transfer cost rate. How the retailer orders items from the two suppliers to maximize his expected profit under limited available funds is analyzed next. Conditions are shown under which the optimal way the retailer orders items from the two suppliers exists

Transshipment Problem and Its Variants: A Review

The transshipment problem is a unique Linear Programming Problem (LLP) in that it considers the assumption that all sources and sinks can both receive and distribute shipments at the same time (function in both directions). Being an extension of the classical transportation problem, the transshipment problem covers a wide range of scenarios for logistics and/or transportation inputs and products and offers optimum alternatives for same. In this work the review of literatures from the origin and current trends on the transshipment problem were carried out. This was done in view of the unique managerial needs and formulation of models/objective functions. It was revealed that the LLP offers a wide range of decision alternative for the operations manager based on the dynamic and challenging nature of logistics management. Key words: Transshipment problem, Linear Programming Problems (LPP), model, objective functions, decision alternative

Modeling a four-layer location-routing problem

Distribution is an indispensable component of logistics and supply chain management. Location-Routing Problem (LRP) is an NP-hard problem that simultaneously takes into consideration location, allocation, and vehicle routing decisions to design an optimal distribution network. Multi-layer and multi-product LRP is even more complex as it deals with the decisions at multiple layers of a distribution network where multiple products are transported within and between layers of the network. This paper focuses on modeling a complicated four-layer and multi-product LRP which has not been tackled yet. The distribution network consists of plants, central depots, regional depots, and customers. In this study, the structure, assumptions, and limitations of the distribution network are defined and the mathematical optimization programming model that can be used to obtain the optimal solution is developed. Presented by a mixed-integer programming model, the LRP considers the location problem at two layers, the allocation problem at three layers, the vehicle routing problem at three layers, and a transshipment problem. The mathematical model locates central and regional depots, allocates customers to plants, central depots, and regional depots, constructs tours from each plant or open depot to customers, and constructs transshipment paths from plants to depots and from depots to other depots. Considering realistic assumptions and limitations such as producing multiple products, limited production capacity, limited depot and vehicle capacity, and limited traveling distances enables the user to capture the real world situations

The family constrained network problem

AbstractAn extension of the classical fixed charge transportation problem is developed that allows a wide variety of practical production, distribution, and inventory planning models to be addressed. Computational results are presented for problems with up to one thousand network constraints and five thousand network variables

Urban Logistics in Amsterdam: A Modal Shift from Roadways to Waterway

The efficiency of urban logistics is vital for economic prosperity and quality of life in cities. However, rapid urbanization poses significant challenges, such as congestion, emissions, and strained infrastructure. This paper addresses these challenges by proposing an optimal urban logistic network that integrates urban waterways and last-mile delivery in Amsterdam. The study highlights the untapped potential of inland waterways in addressing logistical challenges in the city center. The problem is formulated as a two-echelon location routing problem with time windows, and a hybrid solution approach is developed to solve it effectively. The proposed algorithm consistently outperforms existing approaches, demonstrating its effectiveness in solving existing benchmarks and newly developed instances. Through a comprehensive case study, the advantages of implementing a waterway-based distribution chain are assessed, revealing substantial cost savings (approximately 28%) and reductions in vehicle weight (about 43%) and travel distances (roughly 80%) within the city center. The incorporation of electric vehicles further contributes to environmental sustainability. Sensitivity analysis underscores the importance of managing transshipment location establishment costs as a key strategy for cost efficiencies and reducing reliance on delivery vehicles and road traffic congestion. This study provides valuable insights and practical guidance for managers seeking to enhance operational efficiency, reduce costs, and promote sustainable transportation practices. Further analysis is warranted to fully evaluate the feasibility and potential benefits, considering infrastructural limitations and canal characteristics

Integrated Supply Chain Network Design: Location, Transportation, Routing and Inventory Decisions

abstract: In this dissertation, an innovative framework for designing a multi-product integrated supply chain network is proposed. Multiple products are shipped from production facilities to retailers through a network of Distribution Centers (DCs). Each retailer has an independent, random demand for multiple products. The particular problem considered in this study also involves mixed-product transshipments between DCs with multiple truck size selection and routing delivery to retailers. Optimally solving such an integrated problem is in general not easy due to its combinatorial nature, especially when transshipments and routing are involved. In order to find out a good solution effectively, a two-phase solution methodology is derived: Phase I solves an integer programming model which includes all the constraints in the original model except that the routings are simplified to direct shipments by using estimated routing cost parameters. Then Phase II model solves the lower level inventory routing problem for each opened DC and its assigned retailers. The accuracy of the estimated routing cost and the effectiveness of the two-phase solution methodology are evaluated, the computational performance is found to be promising. The problem is able to be heuristically solved within a reasonable time frame for a broad range of problem sizes (one hour for the instance of 200 retailers). In addition, a model is generated for a similar network design problem considering direct shipment and consolidation within the same product set opportunities. A genetic algorithm and a specific problem heuristic are designed, tested and compared on several realistic scenarios.Dissertation/ThesisPh.D. Industrial Engineering 201