Analysis on Effectiveness of Fixed Partition Policy in Optimizing Inventory Routing

Abstract

For the most common distribution system which composed of one-warehouse and multi-retailer, started with discussing the basic idea, the Fixed Partition Policy (FPP) under the best, the worst, and general conditions based on the situations that retailer with/without local limit of inventory-capacity was discussed, the lower and upper cost limits of FPP were derived after optimizing the inventory and distribution separately. The general effectiveness was estimated and verified using a numerical example. In combination with the analysis, some proposals for improving distribution effectiveness were put forward; (1) In general, when any one retailer’s delivery is much smaller than the vehicle capacity, the joint distribution policy should be used to get high effectiveness, and the local inventory-capacity of retailers should be enlarged. (2) When the vehicle capacity and the ultimate distributing frequency of retailer are being fixed, more attention should be paid to the more effective partitions and finding optimized distribution routings.