A MULTI-PRODUCT DYNAMIC INBOUND ORDERING AND SHIPMENT SCHEDULING PROBLEM AT A THIRD-PARTY WAREHOUSE

This paper considers a dynamic inbound ordering and shipment scheduling problem for multiple products that are transported from a supplier to a warehouse by common freight containers. The following assumptions are made: (i) each ordering in a period is immediately shipped in the same period, (ii) the total freight cost is proportional to the number of containers used, and (iii) demand is dynamic and backlogging is not allowed. The objective of this study is to identify effective algorithms that simultaneously determine inbound ordering lot-sizes and a shipment schedule that minimize the total cost consisting of ordering cost, inventory holding cost, and freight cost. This problem can be shown in NP-hard, and this paper presents a heuristic algorithm that exploits the properties of an optimal solution. Also, a shortest path reformulation model is proposed to obtain a good lower bound. Simulation experiments are presented to evaluate the performance of proposed procedures.