Coordinated inventory replenishment and outsourced transportation operations

• Published in: Transportation research. Part E, Logistics and transportation review Vol. 70; pp. 400 - 415
• Main Authors: Gürler, Ülkü, Alp, Osman, Büyükkaramikli, Nasuh Çağdaş
• Format: Journal Article
• Language: English
• Published: Exeter Elsevier India Pvt Ltd 01.10.2014; Elsevier Sequoia S.A
• Subjects: Coordinated logistics; Freight forwarding; Inventories; Inventory; Inventory management; Mathematical analysis; Outsourcing; Policies; Replenishment; Stockpiling; Studies; Supply chain management; Supply chains; Third party logistics; Transportation; Transportation problem (Operations research); Warehousing; Third party logistics; Coordinated logistics; Transportation; Inventory
• ISSN: 1366-5545; 1878-5794
• DOI: 10.1016/j.tre.2014.08.004

•Coordinated inventory and transportation management of a supply chain is studied.•Transportation is outsourced to a third-party logistics company through a contract.•Continuous review (Q, S) and periodic review (R, T) policies are compared.•Structural properties that aid policy optimization are developed.•The settings where a practical periodic policy is also cost efficient are found. We consider a one-warehouse N retailers supply chain with stochastic demand. Inventory is managed in-house whereas transportation is outsourced to a 3PL provider. We develop analytical expressions for the operating characteristics under both periodic and continuous joint replenishment policies. We identify the settings where a periodic review policy is comparable to a continuous review one. In our numerical test-bed, the periodic policy performed best in larger supply chains operating with larger trucks. We also observed that if the excess utilization charge is less than 25%, outsourcing becomes beneficial even if outsourcing cost is 25% more than the in-house fleet costs.