Long‐term effects of short planning horizons for inventory routing problems

This paper presents a detailed study concerning the importance of the planning horizon when solving inventory routing problems (IRPs). We evaluate the quality of decisions obtained by solving a finite-horizon IRP. We also discuss the relevance of explicitly considering profit maximization models rather than the traditional cost minimization variant. As a means to this end, we describe four classes of the IRP corresponding to different types of markets. Two of them lead to nonlinear models, which are linearized. Furthermore, we provide a deterministic simulator to evaluate the long-term effects arising from using planning horizons of varying lengths when solving the IRP. A computational study is performed on cases generated from benchmark data instances. The results confirm that the long-term performance of the IRP decisions is, in part, contingent on the length of the selected planning horizon. They also show that considering profit maximization instead of cost minimization leads to different decisions, generating considerably more revenue and profits, albeit not nearly as much as suggested by individual solutions to static IRPs with short planning horizons. Keywords: profit maximization, path flow, linearization, end effect, simulationpublishedVersio

An operational model for liquefied natural gas spot and arbitrage sales

As more buyers become interested in the spot purchase of liquefied natural gas (LNG), the share of spot trade in LNG business increases. This means that the cash flowing into the upstream of LNG projects is a combination of that generated by deliveries to long-term contract (LTC) customers and uncommitted product and arbitrage spot sales. LTC cash flows are more predictable while uncommitted product and arbitrage cash flows, affected by the dynamics of supply and demand, are more volatile and therefore less predictable. In this research, we formulate an inventory routing problem (IRP) which maximizes the profit of an LNG producer with respect to uncommitted product and arbitrage spot sales, and also LTC deliveries at an operational level. Using the model, the importance of arbitrage, interest rates and compounding frequency in profit maximization, and also the significance of interest rates and fluctuation in spot prices in decision-making for spot sales of uncommitted product are studied. It is proven that writing traditional LTCs with relaxed destination clauses which assist in arbitrage is beneficial to the LNG producer. However, in contrast to what was predicted neither the interest rate nor the compounding frequency has any importance in profit maximization when no change of selling strategy is observed. Apart from these, it is shown that there is a trade-off between the expectation of higher spot prices and the inventory and shipping costs in decision-making for spot sales of uncommitted product in the LNG industry. Finally, it is observed that the interest rate can affect the set of decisions on spot sales of uncommitted product, although the importance of such changes in profit remains to be further explored

Going Bunkers: The Joint Route Selection and Refueling Problem

Managing shipping vessel profitability is a central problem in marine transportation. We consider two commonly used types of vessels—“liners” (ships whose routes are fixed in advance) and “trampers” (ships for which future route components are selected based on available shipping jobs)—and formulate a vessel profit maximization problem as a stochastic dynamic program. For liner vessels, the profit maximization reduces to the problem of minimizing refueling costs over a given route subject to random fuel prices and limited vessel fuel capacity. Under mild assumptions about the stochastic dynamics of fuel prices at different ports, we provide a characterization of the structural properties of the optimal liner refueling policies. For trampers, the vessel profit maximization combines refueling decisions and route selection, which adds a combinatorial aspect to the problem. We characterize the optimal policy in special cases where prices are constant through time and do not differ across ports and prices are constant through time and differ across ports. The structure of the optimal policy in such special cases yields insights on the complexity of the problem and also guides the construction of heuristics for the general problem setting

Optimization strategies for the integrated management of perishable supply chains: A literature review

Purpose: The main purpose of this article is to systematically review the papers published in the period 2005-2020 about the integration of production, inventory and distribution activities in perishable supply chains. Design/methodology/approach: The proposed research methodology is based on several steps. First, database and keywords are selected, with the aim to search and collect the main papers, dealing with the integration of production, inventory, distribution activities in perishable supply chains. Then, a bibliometric analysis is carried out, to detect: the main publishing sources, the chronological distribution, the most used keywords, the featured authors, about the selected papers. A five-dimension classification framework is proposed to carry out a content analysis, where the papers of the literature review are classified and discussed, according to: supply chain structure, objective, perishability type, solution approach, approach validation. Findings: Interest in the application of optimization models for integrated decision-making along perishable supply chains is strongly growing. Integrating multiple stages of the supply chain into a single framework is complex, especially when referring to perishable products. The vast majority of the problems addressed are then NP-Hard. Only a limited quantity of the selected papers aims to solve real-life case studies. There is a need for further research, which is capable of modeling and quantitatively improving existing supply chains. The potentials of Industry 4.0 are currently little explored. Originality/value: Based on the analysis of the papers published, this article outlines the current state of the art on the optimization strategies for the integrated management of perishable supply chains, which are very complex to be managed. Research trends and gaps are discussed, future challenges are presentedPeer Reviewe

A Study in Three Practical Management Science Problems

This study of practical problems in Management Science (MS) describes novel mathematical models for three different decision settings. It addresses questions of: (a) what optimal route should be taken through a time-windows and topographically complex network; (b) what optimal sequencing of scheduled surgeries best coordinates flow of patients through central recovery; and (c) what prices should be charged and what stock amounts should be produced for two markets or channels to maximize profit explicitly, given various capacity and uncertainty conditions. The first problem is in a sport analytics context, using a novel Integer Programming and big data from Whistler-Blackcomb ski resort. The second is to coordinate dozens of surgeries at London Health Sciences Centre, using a novel Constraint Programming model mapped to and parameterized with hospital data, including a tool for visualizing process and patient flow. The third problem is relevant to almost any business with a secondary market or sales channel, as it helps them identify profit optimal prices based on simple demand estimates and cost information they can easily provide for their own setting. The studies use fundamentally different operational research techniques, in each case uniquely extended to the problem setting. The first two are combinatorial problems, neither one extremely beyond human cognitive ability, and both involving lots of uncertainty, and thus the sort of problem managers tend to dismiss as not efficient or practical to solve analytically. We show in the first study that vastly more skiers could achieve the challenge by following our route recommendation, unintuitive as are some of its elements, initially. In the second study, our scheduling model consistently outperforms currently unstructured-independent approach at the hospital. The final study is mathematical but demonstrates that by considering distinct market costs in pricing a firm can invariably earn more profit

Effective medical surplus recovery

We analyze not-for-profit Medical Surplus Recovery Organizations (MSROs) that manage the recovery of surplus (unused or donated) medical products to fulfill the needs of underserved healthcare facilities in the developing world. Our work is inspired by an award-winning North American non-governmental organization (NGO) that matches the uncertain supply of medical surplus with the receiving parties’ needs. In particular, this NGO adopts a recipient-driven resource allocation model, which grants recipients access to an inventory database, and each recipient selects products of limited availability to fill a container based on its preferences. We first develop a game theoretic model to investigate the effectiveness of this approach. This analysis suggests that the recipient-driven model may induce competition among recipients and lead to a loss in value provision through premature orders. Further, contrary to the common wisdom from traditional supply chains, full inventory visibility in our setting may accelerate premature orders and lead to loss of effectiveness. Accordingly, we identify operational mechanisms to help MSROs deal with this problem. These are: (i) appropriately selecting container capacities while limiting the inventory availability visible to recipients and increasing the acquisition volumes of supplies, (ii) eliminating recipient competition through exclusive single-recipient access to MSRO inventory, and (iii) focusing on learning recipient needs as opposed to providing them with supply information, and switching to a provider-driven resource allocation model. We use real data from the NGO by which the study was inspired and show that the proposed improvements can substantially increase the value provided to recipients