International Journal of Production Research, 2015

Vol. 53, No. 16, 47894818, http://dx.doi.org/10.1080/00207543.2014.993047

Decision support system for vendor managed inventory supply chain: a case study
Atul B. Boradea* and Edward Sweeneyb
a
Mechanical Engineering Department, Jawaharlal Darda Institute of Engineering and Technology, Yavatmal, India;
b
Engineering Systems & Management, School of Engineering and Applied Science, Aston University, Birmingham, UK
(Received 29 April 2014; accepted 18 November 2014)

Vendor-managed inventory (VMI) is a widely used collaborative inventory management policy in which manufacturers
manages the inventory of retailers and takes responsibility for making decisions related to the timing and extent of
inventory replenishment. VMI partnerships help organisations to reduce demand variability, inventory holding and distri-
bution costs. This study provides empirical evidence that signicant economic benets can be achieved with the use of a
genetic algorithm (GA)-based decision support system (DSS) in a VMI supply chain. A two-stage serial supply chain in
which retailers and their supplier are operating VMI in an uncertain demand environment is studied. Performance was
measured in terms of cost, prot, stockouts and service levels. The results generated from GA-based model were com-
pared to traditional alternatives. The study found that the GA-based approach outperformed traditional methods and its
use can be economically justied in small- and medium-sized enterprises (SMEs).
Keywords: vendor-managed inventory; decision support system; genetic algorithm; case study

1. Introduction
Many recent developments in the supply chain management (SCM) eld are related to the need for more effective infor-
mation sharing among supply chain members. The rapid rate of development in information technology has made it pos-
sible to share information more effectively and for supply chain actors to cooperate in improving supply chain
performance. Vendor-managed inventory (VMI) is one of the established supply chain strategies aimed at enhancing
competitive advantage through more effective management of supply chain operations (Jung et al. 2005).
Numerous channel partners engaging in collaboration and information sharing in SCM via a VMI system allows
vendors to harness the latest retailer sales data to better forecast demand, control supply chain variability, reduce inven-
tory, smooth production, accelerate inventory replenishment, improve customer service and increase prot. The VMI
system has been widely applied by vendors and buyers in the grocery, household appliance, and hardware and related
industries, as well as in the general merchandise industry (Chen and Wei 2012).
VMI represents a move away from the traditional concept of allocation of responsibility in the replenishment pro-
cess. As opposed to traditional purchases where the customer makes the replenishment decision, the VMI concept
implies that the supplier makes this decision on the customers behalf based on information about customer demand
(Vigtil 2007). These situations lead to a specic kind of replenishment problem known as the inventory routing problem
(IRP), which combines transportation and inventory decisions. IRP assists in the achievement of the objective of VMI,
i.e. to optimise total inventory cost (Abdelmaguid and Dessouky 2006). It involves calculation of inventory distribution
frequency, inventory distribution quantity and the design of vehicle routes. The main concern is to maintain an adequate
level of inventory for all customers and to avoid stockouts. In IRPs, the delivery company (i.e. not the customer) deci-
des how much to deliver to which customers each day. Each day, the delivery company makes decisions about which
customers to visit and how much to deliver to each of them, while keeping in mind that decision made today impact
what has to be done in the future (Campbell, Clarke, and Savelsbergh 2002).
Most studies agree in relation to the positive effects of VMI on supply chain operations. However, its specic adop-
tion in small- and medium-sized enterprises (SMEs) appears to be rare. It is observed in the literature that the decision
problem is solved by deploying operational research (OR) or articial intelligence (AI) tools. Application of the genetic
algorithm (GA) has been advocated by researchers for supply chain optimisation and efciency improvement. Discus-
sions between the authors and supply chain managers in number of SMEs motivated us to explore this issue in detail,
as well as providing us with a real problem to explore. This in turn provided an opportunity to develop a model that

*Corresponding author. Email: atulborade@rediffmail.com

2014 Taylor & Francis

4790 A.B. Borade and E. Sweeney

integrates a small manufacturer and its customers using VMI and to explore the use of a GA-based approach to improve
performance. The rst hypothesis of this study is that VMI could be usefully adopted by supply chain managers in
SMEs. The second hypothesis is that in the presence of specic constraints, a GA approach helps to improve the perfor-
mance. This study developed a GA-based decision support system (DSS) for inventory-related decision-making. The
study considers a single supplier, a single product and multiple retailers. It specically addresses the situation where cus-
tomer demand is higher than production capacity. The primary objective is to minimise the total number of vehicles,
individual and total supply chain cost and the distance travelled by the vehicles, in addition to maximising prots and
customer satisfaction.
The remainder of this paper is organised as follows. The literature review in Section 2 discusses those studies that
are relevant to VMI, IRP and GA in the management of supply chain operations. Problem formulation and the solution
methodology that was used are presented in Sections 3 and 4, respectively. The results of the study are presented and
discussed in Section 5. Finally, some key conclusions are drawn in Section 6.

2. Literature review
2.1 VMI studies
A great deal of literature is available in the VMI eld. Various forms of VMI have been adopted in different industries.
In fully edged implementations, more signicant information and communication technology (ICT) support capability
is required and the majority of inventory management functions of manufacturers are managed by vendors. Partial VMI
requires less ICT support and some of the commonly agreed functions are handled by vendor. We are dealing with a
case study where partial VMI is adopted. In this study, the decision problem is solved by considering it as an IRP,
which uses a GA approach to develop a solution. In this literature review, therefore, studies that cover VMI, inventory
routing and the applicability of GA-based approaches are discussed.
Coordination is the key element of VMI. The different forms of coordination within the supply chain are observed
in the literature. Chen and Wei (2012) discussed multiperiod channel coordination in VMI of deteriorating goods. Three
arrangements, namely price-only contracts, revenue-sharing contracts, and revenue-sharing plus linear rebate and side-
payment contracts for channel coordination, were developed under the retailer-managed inventory (RMI) and VMI sys-
tems, respectively. The analysis revealed that the proposed policy under the VMI system with the revenue-sharing plus
linear rebate and side-payment contract tends to obtain low retail prices and large demand quantities. The advantages of
partial coordination could also be studied by modelling a game. Yugang, Liang, and Huang (2006) studied a VMI sup-
ply chain, where a manufacturer and multiple retailers played a game with each other under partial cooperation in inven-
tory control with VMI policies. The study helped to determine optimal product marketing and inventory policies by
maximising the individual net prots of retailers and manufacturers. Kannan et al. (2013) also analysed the benets of a
VMI agreement in a single supplier and multiple customer setting. Traditional supply chain and VMI were studied and
compared for the same organisation. The analysis was based on the economic-order quantity formula and its related total
cost. VMI yielded better results in the two specic cases that were studied. Similar results were observed by Wang
(2009) when traditional supply chain and VMI arrangements were compared.
Song and Dinwoodie (2008) compared an integrated inventory management policy with two pull-type VMI poli-
cies (VMI-1 and VMI-2) and a traditional RMI policy for certain replenishment lead times and uncertain demands.
Computational results showed that in such stochastic supply chains, VMI policies were better than RMI. Ben-Daya
and Al-Nassar (2008) contended that inventories across the entire supply chain could be more efciently managed
through greater cooperation and better coordination. A cost-minimisation model and its solution procedure were
derived for a coordination problem in a three-layer supply chain involving suppliers, manufacturers and retailers. The
policy led to considerable savings as compared to the scheme that allowed shipments after complete lot production.
VMI requires supply chain entities to unite as a team for logistical planning. With this motivation, Ster, Keskin,
and etinkaya (2008) provided an analytical model, aimed at providing efcient solution methodologies for integrated
decision-making problems associated with location and inventory. Bookbinder, Gm, and Jewkes (2010) argued that
disputes over the benets of VMI arise because few quantitative analyses are available. Their research focused on the
costs incurred by the vendor and the customer in various settings and analysed tradeoffs between independent vs.
coordinated decision-making. The study helped to develop a better understanding of VMI, and in what circumstances
it is likely to succeed or fail.
Bersani, Minciardi, and Sacile (2010), proposed a different approach to sustainable transportation with the specic
goal of decreasing the frequency of deliveries of petroleum products. In their study, VMI is proposed for solving the
problem. Inventory and routing costs were included in the mathematical formulation of the problem. Savaaneril and
 International Journal of Production Research 4791

Erkip (2010) argue that vendor-managed availability is an improvement that exploits advantages beyond VMI. It ensures
the availability of material to suppliers at any cost. This study showed that such vendor-managed systems provide
increased exibility in the manufacturers operations and may bring additional benets. Marqus et al. (2010) presented
a literature review, based on the conceptual elements and suggested a macro-process that summarised both operational
and collaborative elements of VMI. From the above literature, it is quite clear that VMI is a winwin situation for the
manufacturer and retailer. Its adoption helps to improve exibility, improve prots, reduce costs, improve customer
service and optimise inventory.
The contribution of recent papers dealing with VMI, information sharing and IRP is also noted. For instance,
Choudhary and Shankar (2015) noted that the extent and intensity of competitive advantage gained from VMI above
and beyond information sharing (IS) varies from company to company depending on the demand processes and
business environments in which a supply chain operates. The authors carried out numerical study considering a large
number of business settings and determined the incremental value offered by VMI beyond that of IS alone under non-
stationary stochastic demand with service-level constraints. In other study, Dong, Dresner, and Yao (2014) studied
impact of VMI after controlling for its information-sharing component. The study included 52 weeks data that allowed
investigation of rm-level heterogeneity. The sample included a control group of non-VMI distributors to isolate the
effects of the decision-transfer component of VMI from the information-sharing component (i.e. EDI). It was observed
that VMI affected both cost and service components of distributor performance and that manufacturers bullwhip was
related to inventory variability. In their study, Salzarulo and Jacobs (2014) considered a two-echelon serial supply
chain where a single manufacturer replenishes a single downstream customer who faces random, stationary and dis-
crete demand. The performance of a traditional supply chain having no information sharing to one where the customer
shares demand and inventory information with the manufacturer was compared. The case of central control where the
manufacturer has full control over replenishment was also analysed. Renewal theory was applied to develop
probability models to measure the performance of these three supply chain scenarios. A computational analysis of
central control setting offered an improvement over the no-information sharing setting. In the era of cut-throat compe-
tition, increased cost pressure and more demanding customers have forced companies to move ahead of IS to improve
supply chain competitiveness with new forms of retailersupplier collaboration. Choudhary et al. (2014) applied an
integer linear programming models to quantify the benets that can be accrued with a shift in inventory ownership or
shift in decision-making power under deterministic time-varying demand conditions. It was found that higher levels of
collaboration between the supplier and the retailer leads to greater implementation difculties and increases in opera-
tional costs. Choudhary and Shankar (2014) extended this work to investigate the value of VMI above and beyond IS
considering time-varying stochastic demand with service-level constraints. The authors applied a mixed-integer linear
programming model to determine optimal timings and replenishment quantities of the retailer under a static
uncertainty strategy.
Joint replenishment and inventory control of perishable products was discussed by Coelho and Laporte (2014). The
problem was modelled and solved by applying priority policies, where in retailer assigns higher priority to older and
fresher items. The model remained linear even when the product revenue decreased in a non-linear or even in anon-
convex fashion over time. The model identied products of different ages independently from each other in a
multiproduct environment. The model also optimally determined which items to sell at each period based on the
trade-off between cost and revenue. The algorithm effectively computed optimal joint replenishment and delivery
decisions for perishable products.
Our study is similar to the study conducted by Archetti et al. (2007). A distribution problem in which a product has
to be shipped from a supplier to several retailers over a given time horizon was considered. The supplier monitors the
inventory of each retailer and determines its replenishment policy, guaranteeing that no stockout occurs at the retailer
(i.e. a VMI policy). Every time a retailer is visited, the quantity delivered by the supplier has to be such that the maxi-
mum inventory level is reached (i.e. deterministic order-up-to level policy). Shipments from the supplier to the retailers
are performed by a vehicle of given capacity. The problem was to determine for each discrete time period the quantity
to ship to each retailer and the vehicle route. A mixed-integer linear programming model and branch-and-cut algorithm
was applied to solve the problem optimally. The optimal solution of the problem with the solution of two problems
obtained by relaxing the deterministic order-up-to level policy was compared.

2.2 Inventory routing and GA approaches

The GA is a randomised search technique that is based on ideas from the natural selection process. Starting from an
initial set of solutions, generations of new solutions are obtained through applying neighbourhood search operators.
These operators are applied to randomly selected solutions from the current set of solutions, where the selection
4792 A.B. Borade and E. Sweeney

probability is proportional to the solutions objective function value. GAs have been successfully implemented for a
wide range of combinatorial optimisation problems (Gen and Cheng 1997, cited in Abdelmaguid and Dessouky 2006).
The authors also reviewed the literature on inventory routing and GA-based studies in VMI. Nachiappan, Gunasekaran,
and Jawahar (2007) presented an information technology (IT)-driven normative model of the VMI system in a
two-echelon supply chain comprising m vendors and n buyers, A knowledge management system using a GA was
proposed to solve supply chain problems. The proposed model delivered better results than traditional models. Kim,
Kim, and Lee (2011) studied the multiperiod capacitated vehicle routing problem (CVRP) aimed at determining a ser-
vice combination for each customer, as well as the vehicle routes in each period while satisfying the restrictions on
vehicle capacity and travel distance/time. The problem was solved using a two-stage heuristic, where an initial solution
was obtained by assigning a service combination to each collection point. The solution was then improved by changing
the service combination assigned to each collection point. Computational experimentation was carried out on the case
data and signicant improvements over conventional methods are reported. Tarantilis, Kiranoudis, and Vassiliadis (2002)
described a new stochastic search metaheuristic algorithm referred to as the list-based threshold accepting algorithm for
solving the CVRP. The proposed algorithm produced satisfactory solutions in a reasonable amount of time by tuning
only one parameter of the algorithm thus making it a reliable and practical tool for DSSs designed for solving
real-world vehicle routing problems. Lee, Moon, and Park (2010) studied the supply chain network design problem,
which involves the location of facilities, allocation of facilities and routing decisions. The study proposed two mixed
integer programming models, one without routing and one with routing. A heuristic algorithm based on LP-relaxation
method was used to solve the routing model. The results show that a heuristic algorithm could nd a better solution in
a reasonable time. Thangiah and Salhi (2001) proposed a generalised clustering method using a GA-based approach.
The Genetic Clustering (GenClust) method was used for solving the multi-depot vehicle routing problem. The genetic
clustering method found 11 new best known solutions from the 23 problems in the literature set. Chakroborty and
Mandal (2005) proposed an optimisation algorithm for the general vehicle routing problem. The algorithm used
mutation-based GAs (or asexual GAs). The algorithm gave optimal or near-optimal solutions with minimal
computational effort. Prins, Labadi, and Reghioui (2009) used tour splitting heuristics for CVRPs. This involves
building one giant tour that visits all customers and then splitting this tour into capacity-feasible vehicle trips. Numerical
tests on the capacitated arc routing problem and the CVRP showed that randomised versions outperform classical
constructive heuristics. Jabali et al. (2009) presented a model that optimises the relevant costs taking into account
unplanned delays. Experiments using a tabu search (TS) heuristic on a large number of data-sets were provided. The
trade-off between routing schedules that are and those that are not protected against delays was examined.
From the literature, it can be seen that researchers have dealt with specic problems and attempted to nd appropri-
ate solutions. Some researchers have adapted solutions to specic problems with a view to making them more
generically applicable. Such research often involves the adaptation of optimisation techniques that use multiobjective
decision-making criteria (Chakroborty and Mandal 2005; Abdelmaguid and Dessouky 2006). Each supply chain problem
is unique in nature and there cannot be a one-size-ts-all solution. Some techniques may prove useful in some
instances but may not provide optimal solutions in other situations. Researchers must make judgements in relation to
the characteristics of the inventory problem and nd the optimal (or a near optimal) solution. Our case involves a small
enterprise where the focus is on achieving maximum prot. This would seem to lend itself very well to the application
of GA-based DSSs given GAs suitability in addressing maximisation problems. In this context, it is important that the
results achieved are compared with more traditional approaches.

2.3 Hypotheses development

From the above mentioned studies it is clear that VMI in its various forms has been applied effectively to inventory
decision-making. In most of the studies, either a mathematical modelling approach or computer programme is used to
nd the optimal solution. The AI tools are also used effectively for this purpose. From the literature review, it is further
observed that the problem is addressed in quite a piecemeal and fragmented manner. In some cases the schedule is
important, with some cases focusing on building routes. Some try to t in a delivery window, while others estimate the
optimum inventory to be supplied. The solutions are not compared to the traditional solutions typically applied by
SMEs. This study considers the problem in a holistic and integrated manner and decides the retailers inventory, vehicle
routes and vehicle utilisations for each vehicle, as well as optimising prot for retailers and the supplier using a GA-
based approach. In this way, the literature reviewed by the authors as summarised above leads to the development of
the following hypotheses:
 International Journal of Production Research 4793

Figure 1. Outline of simulation.

H1 In the presence of specic constraints, a GA-based approach helps to improve performance; and,

H2 VMI could be usefully adopted by supply chain managers in SMEs.

Figure 2. Outline of GA procedure.

4794 A.B. Borade and E. Sweeney

3. Problem description and methodology

3.1 Problem description
We consider a case study involving a manufacturer that produces bread and supplies to multiple retailers. The retailers
are geographically dispersed and have different demands each day. The product is fast moving and perishable in nature;
therefore, the problem needs to be addressed carefully. Initially, there was no agreement between the manufacturer and
the retailers about supply of product. Retailers used to place orders with the manufacturer to satisfy the demand of end
users. With increasing demand for the product, it became essential for the manufacturer to revise the replenishment and
distribution strategy. Literature shows that in such circumstances, VMI partnerships help organisations to reduce demand
variability, inventory holding and distribution costs. IRP in VMI nds a distribution strategy that minimises long-term
distribution costs (Savelsbergh and Song 2007). IRP is generally solved using dynamic programming, linear program-
ming, mixed-integer programming, metaheuristics, fuzzy logic and genetic operators. (Thangiah and Salhi 2001;
Chakroborty and Mandal 2005; Jabali et al. 2009; Prins, Labadi, and Reghioui 2009; Lee, Moon, and Park 2010; Kim,
Kim, and Lee 2011). We undertook an IRP in the case company aimed at taking inventory and replenishment-related
decisions. Based on the results of the above mentioned studies we felt that the multiple objectives could be effectively
solved using our proposed GA-based approach.
This study is an extension of Borade and Bansod (2010), which applied a fuzzy logic approach for IRP. In their
study, it was found that many retailers were not served with any quantity. In the present study, we aim to solve the same
problem with genetic operators. Some of the assumptions and objectives are also similar. However, in this study, by
adopting genetic operators, we will not be able to serve all the retailers, but we could avoid zero allocation and allot at
least some quantity to every retailer. Using genetic operators, relative importance is assigned to the retailers. Since the
demand is higher than production capacity, retailers have to be chosen such that prots for suppliers and retailers
improve. The supply chain manager has to plan the detailed logistics of supplying the demand of retailers. Finally routes
are decided. The results are then compared with various approaches. For these comparisons, this study used the multicri-
teria decision-making tool MAPPAC.
The specic objectives of the study are:
(1) To decide the number of retailers to be served;
(2) To decide the inventory to be supplied at each retail outlet;
(3) To decide the number of vehicles taking into account vehicle capacity;
(4) To decide the route that minimises retailer cost, manufacturer cost and the system-wide cost;
(5) To maximise retailer and supplier prot;
(6) To maximise delivery volume per mile;
(7) To minimise the bullwhip effect;
(8) To improve customer service levels;
(9) To maximise the number of retailers to be served; and,
(10) To improve the total delivery volume.
Formulation of a simulation or mathematical model of any real-world problem requires that certain assumptions are
made. The main assumptions made during the detailed formulation of this study are shown in Table A. While formulat-
ing the problem certain notations are used these are shown in Table B.

3.2 Methodology
In this paper, we adopt a GA-based approach for inventory replenishment decisions. The entire programme was devel-
oped and executed in Matlab (see Figure 1 for screenshot). The number of retailers, their locations, various associated
costs and vehicle details were fed into the programme. Since the ultimate objective is to decide the daily inventory for
retailers based on GAs, demand over the previous four weeks for each retailer was also fed into the programme. As
noted earlier, we are dealing with a case study where total demand is higher than manufacturing capacity. Traditional
methods such as simple heuristics, maximum usage, Last-in-rst-out (LIFO), First-in-rst-out (FIFO) and equal priority
were also used for deciding supply quantities for each retailer. The results of the fuzzy-based approach which was
developed in Borade and Bansod (2010) were also taken for comparison.
Results obtained using the GA-based approach were then compared with those obtained from the more traditional
methods. Lastly, using the swap and single-point insertion method, the routes were decided. An outline of research is
shown in Figure 1, and the GA module process ow is shown in Figure 2.
 International Journal of Production Research 4795

In Section 3.3, the various criteria that are used for choosing customers are explained. A detailed discussion of the
genetic operators is provided in Section 3.4. The following step i.e. determining the routes of customer who are
chosen for service is discussed in Section 3.5.

3.3 Prioritising and serving customers

Our objectives are: to decide the number of retailers to be served; the inventory to be supplied at each retailers outlet;
and the number of vehicles required by taking into account vehicle capacity. In the rst phase of our study, retailers are
prioritised and served by applying various criteria as discussed below.

3.3.1 Simple heuristics

The application of this criterion involves trying to supply whatever is demanded from the given order-log. No priority is
accorded to any retailer. The set of customers whose total demand quantity is closest to total production capacity is
chosen for service using the owchart shown in Appendix 1.

3.3.2 Maximum usage

Using this criterion, retailers are served based on their usage on the particular day. Thus, the retailer with the highest
daily demand quantity is chosen for replenishment rst. The second to be replenished would be the one with the
second highest demand and so on. The retailer with the lowest demand would be served last. The set of customers
whose total demand quantity is closest to total production capacity is chosen for service using the owchart shown in
the Appendix 1.

3.3.3 Last-in-rst-out
With this policy, the retailer who placed the most recent order is served rst with retailers who placed earlier orders
given lower priority. The set of customers whose total demand quantity is closest to total production capacity is chosen
for service using the owchart shown in the Appendix 1.

3.3.4 First-in-rst-out
With this policy, the retailer who places the earliest order is served rst with the retailers who place later orders given
lower priority. The set of customers whose total demand quantity is closest to total production capacity is chosen for
service using the owchart shown in the Appendix 1.

3.3.5 Equal priority

In this policy, all retailers are considered as equal. The difference in total actual demand and maximum production is
distributed equally to every retailer. The replenishment is done irrespective of order pattern. For example, if total
demand is 25,000 for 50 retailers, and maximum production is 20,000 units, then the difference (i.e. 5000 units) is
equally distributed among the 50 retailers. Thus, 100 units would be deducted from the demand of each retailer. As with
the other criteria, the set of customers whose total demand quantity is closest to total production capacity is chosen for
service using the owchart shown in the Appendix 1.

3.3.6 Fuzzy approach

A fuzzy minmax neural (FMMN) technique was adopted to solve the problem. This FMMN clustering technique
uses a hyperbox (HB) fuzzy set concept. In the FMMN algorithm, a pair of minmax points denes HBs and a
membership function is dened with respect to these points. The membership function for each HB fuzzy set
describes the degree to which the pattern ts within a HB. The FMMN learning algorithm has three steps expan-
sion, overlap and contraction of the HBs, respectively. The retailer weightings, demand variation and various costs
were used as training data for HBs. As discussed in Borade and Bansod (2010) the procedure adopted for training
the HBs was as follows:
4796 A.B. Borade and E. Sweeney

Step 1 Functions were dened.

Step 2 Customer weightings, demand variation, order processing cost, transportation cost, inventory handling cost,
manufacturing cost and stockout cost were loaded.
Step 3 Feature matrix was normalised.
Step 4 Class index was appended.
Step 5 HBs were initialised with min and max points.
Step 6 Learning of FMMN network was achieved.
Step 7 Vectors containing indices of HB corresponding to the class of applied pattern and length were found.
Step 8 HB index belonging to the same class was stored.
Step 9 Membership function of HB was found.
Step 10 Minmax points were created using Equations (3) and (4).
Step 11 Overlapping was checked using the contraction process.
Step 12 Finally, a trained set of HBs was found.

3.4 GA-based approach

The algorithm uses one population only, which may contain both feasible and infeasible individuals. The algorithm
calculates the number of retailers to be served and their allocation as well as the route for each day. The process is
adopted from Bhagwat, Bhushi, and Vizayakumar (2010).

3.4.1 Generation of initial chromosomes

The methodology is initialised by generating chromosomes X, each of length Nr.
(1) Prior to generating the initial chromosomes, a set {S} is generated, which comprises the set of suppliers which
are to be served.
(2) By considering the above determined sets, the initial chromosomes are generated as follows:
Xk fX 0; X 1; X 2; Xnr  1g; 0 \k \Np  1

(3) Each gene of the chromosome is an arbitrary integer generated within the interval [0, | |i 1]
We used a grouping representation of a tour for total number of retailers denoted as follows.
[
k
S Tk
k1
S
where, S-Solution and Tk vn vn1 Tki
Tk indicates tour containing (1 to 50) retailers. And the number of retailers is denoted by k. Tki is subgroup of tour
allotted to exact number of chosen retailers corresponding to Vn vehicles.

3.4.2 Fitness evaluation

Once the chromosomes and the corresponding status set are generated, then they are subjected to the determination of
tness value. The tness of the generated chromosome is evaluated by a tness function which is developed for the
particular problem. Here, the tness function is given by
X
Ns X
prodc
tk Rt  fRt xk i; jgt Rno Sinv minfSinv  Rno g
1 1

We have used two sets of chromosomes Ns and Prodc. Ns has maximum limit of 50, and Prodc which has maximum
limit of 18000. {Rt (xk(i, j))}t is the instant of path or optimal tour in the xk, min{Sinv * Rno} indicated by the Prodc
generated with k chromosome. Among the Ns chromosomes, the Sinv chromosomes have maximum tness and suitable
path xk as the best chromosomes.
 International Journal of Production Research 4797

3.4.3 Crossover
Crossover is one of the genetic operators that mates two chromosomes so as to produce an offspring. In the proposed
methodology, a single-point crossover operation is performed to mate the parent chromosomes (i.e. the best
chromosomes). The crossover is performed with a crossover rate of Cr. Based on Cr, the crossover point Cp is selected
in the parent chromosomes and the genes of the parent chromosomes that are beyond the Cp are interchanged between
the two parent chromosomes. Using this crossover operation, an offspring is obtained for two parent chromosomes and
the resulting offspring has, therefore, the genes of both the parent chromosomes. In this manner, Np/2 offspring is
obtained while mating the Np/2 parent chromosomes. The offspring obtained from crossover operations are subjected to
mutation to produce new offspring.

3.4.4 Mutation
The mutation operator is responsible for producing a new generation from the best initial chromosomes. Among several
mutation operators, random mutations were performed at a mutation rate of Mr. Based on Mr, the number of the muta-
tion points are determined as Nm = MrNr.

3.4.5 Termination criteria

The chromosomes present in the population pool are evaluated by the tness function as already performed and the
same process is repeated iteratively. The process is repeated until it reaches a maximum number of iterations (Ng). Once
it has been terminated, a nal best chromosome is obtained from the population pool based on its tness value. In the
nal best chromosome, each gene indicates the suppliers who can supply the corresponding inventory in a cost-effective
manner.

3.5 Routing
From the given set of locations of retailers, the retailer with minimum distance was chosen as an arbitrary point to start
the routing procedure. After the initial solution, a swap operator was applied for improving the solution. The swap
operator calculates the minimum distance and alters the retailers service order so as to get the optimum route (i.e. that
which minimises travelling distance) using the owchart shown in the Appendix 1.
The solution obtained is further improved by applying a single-point insertion method where the insertion heuristic
inserts new customer to the route. It tries all possible insertions in the routes for a specied vehicle using following
algorithm:

swpt1 = oor(npts * rand) + 1;

swpt2 = oor((npts 1) * rand) + 1;
order = 1:npts;
order(swpt1) = [];
order = [order(1:swpt2) swpt1 order((swpt2 + 1):(npts 1))];
pnew = p(order);
lennew = LocalPathLength(pnew,distmatrix);
iennew < len,
p = pnew;
len = lennew;
drawFlag = 1;
end

From the given data, retailers and routes are chosen such that total supply does not exceed total production and vehicle
capacity (i.e. R1 + R2 + R3 + Rn. < Max. Production). The group of these retailers is assigned to each vehicle and a
route such that R1 + R2 + R3 + < Vc1. If the supplying quantity exceeds vehicle capacity then another group of
retailers is formed and allocated to the next vehicle and to another route (i.e. R5 + R6 + R7 + < Vc2). The process is
repeated until the total truck load is less than or equal to total production capacity.
4798 A.B. Borade and E. Sweeney

Figure 3. Screen shot of VMI based DSS showing tools.

4. Performance measures
In order to identify the optimum approach, the results obtained were evaluated using various performance measures.
The VMI approach adopted in this study affects the balance of the cost burden for retailers and suppliers as discussed
below.
Retailers Total Cost: Retailers supply chain cost is a measure of the cost borne by a retailer while maintaining nished
goods inventory. Each time an order is placed, there is some associated cost (ordering cost). Similarly, after receipt of
nished goods at the store until they are sold, the retailer has to bear the holding cost. In this study, the sum of a
retailers ordering cost and holding cost is the retailers total cost:
Rtc Roc Rhc (1)
Suppliers Total Cost: Suppliers supply chain cost is a measure of the cost borne by a supplier while processing raw
materials and converting them into nished goods. It includes the cost of manufacturing, the cost of processing retailers
orders, suppliers shipping cost, suppliers holding cost, suppliers stockout cost and other variable costs.

Suppliers manufacturing cost: This is the cost associated with the acquisition of raw materials and transforming them
into nished goods. It includes material, labour and overhead charges per unit.
Suppliers order processing cost: Since this is a case of VMI, orders are allocated by suppliers and conrmation is made
by retailers. This exercise is carried out daily in order to optimise inventory. The cost associated with processing and
nalising orders is suppliers order-processing cost.
Suppliers shipping cost: Suppliers are responsible for bringing raw materials to their plants. With VMI, they are also
responsible for the delivery of nished goods to retailers. Thus, the suppliers shipping cost includes carriage inward
and carriage outward.
 International Journal of Production Research 4799

Figure 4. Screen shot showing cluster of customers.

Suppliers holding cost: This is the cost associated with holding raw materials, work-in progress and nished goods in
the suppliers plant.
Supplier stockout cost: With VMI, the supplier is responsible for maintaining retailers inventory. Each time a retailer
runs out of stock, the stockout cost has to be borne by the supplier.
Suppliers variable cost: This includes the cost/km associated with fuel, labour cost and an apportionment of mainte-
nance cost to vehicles.
X X X X X X X
Stc Smc Sopc Ssc Shc Ssoc Svc (2)
Total supply chain cost: This is an important measure in the analysis of supply chains. It includes retailers total supply
chain costs and the suppliers total supply chain cost.
X X X
Tsc Rtc Stc (3)
Retailers prot: This is the retailers share of prot. It is the difference between total revenue and total costs of the
retailer.
Rp Rsp  Ssp  Sinv  Rtc

Rp Tsp  Sinv  Rtc

where Tsp Rsp  Ssp (4)

Suppliers prot: This is the suppliers share of the prot. It is the difference between total revenue and total costs of
the supplier.
4800 A.B. Borade and E. Sweeney

Table 1. Location details of retailers.

Retailer number (N) Location coordinates (X, Y) Retailer number (N) Location coordinates (X, Y)

1 (0, 2.5) 26 (7.2, 2)

2 (1.1, 5.3) 27 (7.2, 0.2)
3 (0.5, 5.3) 28 (6.2, 2)
4 (0.5, 8.6) 29 (7.7, 4.8)
5 (1, 15) 30 (7.7, 6.3)
6 (2, 15) 31 (8.2, 6.3)
7 (1, 15.5) 32 (8.9, 8.7)
8 (1.3, 16.4) 33 (6.8, 8.7)
9 (0.5, 17) 34 (5.8, 6.5)
10 (0.1, 15.8) 35 (4.5, 6.5)
11 (0.5, 15.8) 36 (7.6, 1.6)
12 (5, 15) 37 (6.3, 1.2)
13 (5.5, 13.1) 38 (4.3, 0.2)
14 (7.8, 12.2) 39 (4, 2)
15 (7.3, 12.3) 40 (5, 4)
16 (5.3, 10.7) 41 (1.6, 3.4)
17 (3.4, 3.4) 42 (0.9, 4.9)
18 (4.4, 0.1) 43 (2, 5.5)
19 (3.8, 1) 44 (3, 3)
20 (3.2, 1) 45 (3, 2)
21 (4.8, 0.8) 46 (1.4, 1.3)
22 (5.9, 0.8) 47 (2.7, 0.5)
23 (4.7, 2.5) 48 (2.3, 0.5)
24 (5.5, 3) 49 (1.2, 1)
25 (6.1, 3) 50 (0.8, 0)

Table 2. Retailers details (average demand of 4 weeks and demand for the day in question).

Customer no Average demand Actual demand Customer no Average demand Actual demand

1 551 555 26 507 541

2 514 510 27 558 353
3 459 433 28 379 301
4 533 443 29 443 476
5 590 477 30 484 631
6 504 414 31 518 561
7 598 296 32 423 412
8 588 275 33 479 428
9 564 388 34 464 569
10 524 502 35 523 592
11 605 500 36 419 444
12 477 170 37 403 342
13 530 508 38 501 451
14 594 523 39 501 661
15 561 528 40 463 762
16 551 480 41 510 705
17 618 370 42 514 591
18 496 288 43 498 503
19 546 349 44 528 462
20 526 513 45 495 501
21 524 591 46 540 647
22 477 496 47 525 809
23 478 395 48 554 816
24 482 462 49 580 641
25 472 588 50 542 488
 International Journal of Production Research 4801

Table 3. Cost and other parameters (rst simulation).

Details Values

Actual demand 24,741

Production capacity 18,000
Difference 6541
Number of retailers 50
Vehicle capacity 6000
Number of vehicles 3
Manufacturing cost/unit INR 8
Ordering cost/unit INR 0.75
Order processing cost/unit INR 0.25
Shipping cost/unit INR 2.0
Holding cost (retailer) INR 0.2
Holding cost(manufacturer) INR 0.4
Stock out cost/unit INR 0.75
Variable cost/km INR 1

Sp Ssp  Sinv  Stc (5)

Service levels: This indicates how well customers are being served. We have used two service measures. This takes into
account both the serviced and non-serviced customers, as well as the proportion of the demand that was satised.

Figure 5. Fitness value.

4802 A.B. Borade and E. Sweeney

Table 4. Simple heuristics model results.

Vehicle Customer Demand Actually Vehicle Customer Demand Actually

no. no. Location quantity supplied no. no. Location quantity supplied

1 43 (2, 5.5) 503 503 2 2 (1.1, 5.3) 510 510

1 42 (0.9, 4.9) 591 591 2 1 (0, 2.5) 555 555
1 41 (1.6, 3.4) 705 705 2 12 (3.4, 3.4) 170 170
1 40 (5, 4) 762 762 2 35 (4.5, 6.5) 592 592
1 38 (4.3.0.2) 451 451 2 34 (5.8, 6.5) 569 569
1 37 (6.3, 1.2) 342 342 3 32 (8.9, 8.7) 412 412
1 36 (7.6, 1.6) 444 444 3 31 (8.2, 6.3) 561 561
1 6 (2, 15) 414 414 3 29 (7.7, 4.8) 476 476
1 5 (0.1, 15.8) 477 477 3 28 (6.2, 2) 301 301
1 10 (0.5, 15.08) 502 502 3 22 (5.9, 0.8) 496 496
1 11 (1, 15.5) 500 500 3 27 (7.2, 0.2) 353 353
1 7 (1, 15.5) 296 296 3 26 (7.2, 2) 541 541
2 9 (0.5, 17) 388 388 3 25 (6.1, 3) 588 588
2 13 (5.5, 13.1) 508 508 3 24 (5.5, 3) 462 462
2 15 (7.5, 12.3) 528 528 3 18 (4.4, 0.1) 288 288
2 14 (7.8, 12.2) 523 523 3 21 (4.8, 0.8) 591 591
2 16 (5.3, 10.7) 480 480 3 19 (3.8, 1) 349 349
2 4 (0.5, 8.6) 443 443 3 20 (3.2, 1) 513 513
2 3 (0.5, 5.3) 433 433

Retailers served = 37 Total 17,617 17,617

Bullwhip: This is the phenomenon of demand amplication of orders across the supply chain.
B Cout =Cin (8)

Table 5. Maximum usage model results.

Vehicle Customer Demand Actually Vehicle Customer Demand Actually

no. no. Location quantity supplied no. no. Location quantity supplied

1 48 (0, 2.5) 816 816 2 38 (6.8, 8.7) 451 451

1 15 (3.4, 3.4) 528 528 2 36 (5.8, 6.5) 444 444
1 2 (3.2, 1) 510 510 2 26 (5.3, 10.7) 541 541
1 20 (3.8, 1) 513 513 2 31 (7.8, 12.2) 561 561
1 13 (4.8, 0.8) 508 508 2 1 (7.3, 12.3) 555 555
1 14 (4.4, 0.1) 523 523 2 34 (5.5, 13.1) 569 569
1 10 (4.7, 2.5) 502 502 3 30 (1.3, 16.4) 631 631
1 45 (5.5, 3) 501 501 3 49 (1, 15.5) 641 641
1 11 (6.1, 3) 500 500 3 42 (0.5, 15.8) 591 591
1 22 (7.2, 2) 496 496 3 39 (1, 15) 661 661
1 50 (7.2, 0.2) 488 488 3 46 (2, 15) 647 647
2 43 (5.9, 0.8) 503 503 3 41 (0.5, 8.6) 705 705
2 16 (6.2, 2) 480 480 3 40 (0.5, 5.3) 762 762
2 5 (7.7.4.8) 477 477 3 47 (1.1, 5.3) 809 809
2 29 (7.7, 6.3) 476 476
2 24 (8.2, 6.3) 462 462
2 44 (8.9, 8.7) 462 462

Retailers served = 31 Total 17,313 17,313

 International Journal of Production Research 4803

Table 6. Last in rst out model results.

Vehicle Customer Demand Actually Vehicle Customer Demand Actually

no. no. Location quantity supplied no. no. Location quantity supplied

1 9 (0.5, 17) 388 388 2 6 (1.1, 5.3) 414 414

1 4 (1, 15) 443 443 2 41 (1.6, 3.4 705 705
1 11 (0.5, 15.8) 500 500 2 39 (4, 2) 661 661
1 8 (1.3, 16.4) 275 275 2 12 (5, 15) 170 170
1 49 (1.2, 1) 641 641 2 19 (3.8.1) 349 349
1 43 (2, 5.5) 503 503 2 26 (7.2, 2) 541 541
1 20 (3.2, 1) 513 513 3 21 (4.8, 0.8) 591 591
1 16 (5.3, 10.7) 480 480 3 38 (4.3, 0.2) 451 451
1 14 (7.8, 12.2) 523 523 3 28 (6.2, 2) 301 301
1 23 (4.7, 2.5) 395 395 3 13 (5.5, 13.1) 508 508
1 30 (7.7, 6.3) 631 631 3 27 (7.2, 0.2) 353 353
1 31 (8.2, 6.3) 561 561 3 33 (6.8, 8.7) 428 428
2 34 (5.8, 6.5) 569 569 3 24 (5.5, 3) 462 462
2 17 (3.4, 3.4) 370 370 3 18 (4.4, 0.1) 288 288
2 36 (7.6, 1.6) 444 444 3 44 (3, 3) 462 462
2 29 (7.7, 4.8) 476 476 3 45 (3, 2) 501 501
2 37 (6.3, 1.2) 342 342 3 15 (7.3, 12.3) 528 528
2 32 (8.9, 8.7) 412 412 3 42 (0.9, 4.9) 591 591
2 3 (0.5, 5.3) 433 433 3 22 (5.9, 0.8) 496 496

Retailers served = 38 Total 17,699 17,699

C Standard deviation of demand=Mean demand (9)

Volume per mile: This is the sum total of vehicle utilisation of each vehicle divided by the sum total of distance
travelled by each vehicle.
X
Vpm Vno =Total distance (10)

Table 7. First in rst out model results.

Vehicle Customer Demand Actually Vehicle Customer Demand Actually

no. no. Location quantity supplied no. no. Location quantity supplied

1 14 (7.8, 12.2) 523 523 2 44 (3, 3) 462 462

1 23 (4.7, 2.5) 395 395 2 27 (7.2, 0.2) 353 353
1 36 (7.6, 1.6) 444 444 2 24 (5.5, 3) 462 462
1 17 (3.4, 3.4) 370 370 2 33 (6.8, 8.7) 428 428
1 37 (6.3, 1.2) 342 342 2 19 (3.8.1) 349 349
1 29 (7.7, 4.8) 476 476 2 13 (5.5, 13.1) 508 508
1 4 (0.5, 8.6) 443 443 3 39 (4, 2) 661 661
1 10 (0.1, 15.8) 502 502 3 28 (6.2, 2) 301 301
1 46 (1.4, 1.3) 647 647 3 21 (4.8, 0.8) 591 591
1 7 (1, 15.5) 296 296 3 38 (4.3, 0.2) 451 451
1 6 (2, 15) 414 414 3 26 (7.2, 2) 541 541
1 9 (0.5, 17) 388 388 3 12 (5, 15) 170 170
1 5 (1, 15) 477 477 3 2 (1.1, 5.3) 510 510
2 48 (2.3, 0.5) 816 816 3 40 (5, 4) 762 762
2 50 (0.8, 0) 488 488 3 3 (0.5, 5.3) 433 433
2 11 (0.5, 15.8) 500 500 3 18 (4.4, 0.1) 288 288
2 8 (1.3, 16.4) 275 275 3 1 (0, 2.5) 555 555
2 43 (2, 5.5) 503 503 3 30 (7.7, 6.3) 631 631
2 49 (1.2, 1) 641 641

Retailers served = 37 Total 17,396 17,396

4804 A.B. Borade and E. Sweeney

Table 8. Equal priority model results.

Vehicle Customer Demand Actually Vehicle Customer Demand Actually

no. no. Location quantity supplied no. no. Location quantity supplied

1 44 (3, 3) 462 324 2 1 (0, 2.5) 555 417

1 45 (3, 2) 647 509 2 12 (3.4, 3.4) 170 32
1 48 (0, 2.5) 816 678 2 35 (4.5, 6.5) 592 454
1 43 (2, 5.5) 503 365 2 34 (5.8, 6.5) 569 431
1 41 (1.6, 3.4) 705 567 2 49 (1.2, 1) 641 503
1 40 (5, 4) 762 624 2 50 (0.8, 0) 488 350
1 39 (4, 2) 661 523 2 33 (6.8, 8.7) 428 290
1 38 (4.3.0.2) 451 313 3 32 (8.9, 8.7) 412 274
1 37 (6.3, 1.2) 342 204 3 31 (8.2, 6.3) 561 423
1 36 (7.6, 1.6) 444 306 3 30 (7.7, 6.3) 631 493
1 6 (2, 15) 414 276 3 29 (7.7, 4.8) 476 338
1 5 (0.1, 15.8) 477 339 3 22 (5.9, 0.8) 496 358
1 10 (0.5, 15.08) 502 364 3 46 (1.4, 1.3) 647 509
1 11 (1, 15.5) 500 362 3 47 (1.1, 5.3) 809 671
1 7 (1, 15.5) 296 158 3 27 (7.2, 0.2) 353 215
2 9 (0.5, 17) 388 250 3 26 (7.2, 2) 541 403
2 8 (1.3, 16.4) 275 137 3 25 (6.1, 3) 588 450
2 17 (3.4, 3.4) 370 232 3 24 (5.5, 3) 462 324
2 13 (5.5, 13.1) 508 370 3 23 (4.7, 2.5) 395 257
2 15 (7.5, 12.3) 528 390 3 18 (4.4, 0.1) 288 150
2 14 (7.8, 12.2) 523 385 3 21 (4.8, 0.8) 591 453
2 16 (5.3, 10.7) 480 342 3 19 (3.8, 1) 349 211
2 4 (0.5, 8.6) 443 305 3 20 (3.2, 1) 513 375
2 3 (0.5, 5.3) 433 295
2 2 (1.1, 5.3) 510 372

Retailers served = 48 Total 24,741 17,371

Table 9. Fuzzy logic model results.

Vehicle Customer Demand Actually Vehicle Customer Demand Actually

no. no. Location quantity supplied no. no. Location quantity supplied

1 46 (1.4, 1.3) 647 644 2 32 (8.9, 8.7) 412 241

1 45 (3, 2) 501 462 2 31 (8.2, 6.3) 561 547
1 44 (3, 3) 462 365 2 30 (7.7, 6.3) 631 629
1 43 (2, 5.5) 503 476 2 22 (5.9, 0.8) 496 361
1 42 (0.9, 4.9) 591 586 2 26 (7.2, 2) 541 540
1 41 (1.6, 3.4) 705 705 2 25 (6.1, 3) 588 579
1 39 (4, 2) 661 661 2 24 (5.5, 3) 462 351
1 38 (4.3, 0.2) 451 332 2 18 (4.4, 0.1) 288 0
1 37 (6.3, 1.2) 342 121 2 21 (4.8, 0.8) 591 561
1 36 (7.6, 1.6) 444 300 3 20 (3.2, 1) 513 423
1 5 (1, 15) 477 394 3 17 (3.4, 3.4) 370 138
1 10 (0.5, 15.8) 502 448 3 34 (5.8, 6.5) 569 558
1 11 (0.5, 15.8) 500 466 3 35 (4.5, 6.5) 592 548
1 7 (1, 15.5) 296 18 3 4 (0.5, 8.6) 443 290
2 9 (0.5, 17) 388 188 3 3 (0.5, 5.3) 433 253
2 8 (1.3, 16.4) 275 0 3 2 (1.1, 5.3) 510 494
2 12 (5, 15) 170 0 3 1 (0, 2.5) 555 490
2 13 (5.5, 13.1) 508 460 3 49 (1.2, 1) 641 641
2 15 (7.3, 12.3) 528 451 3 50 (0.8, 0) 488 417
2 14 (7.8, 12.2) 523 464 3 48 (2.3, 0.5) 816 796
2 16 (5.3, 10.7) 480 353 3 47 (2.7, 0.5) 809 786
2 33 (6.8, 8.7) 428 266

Retailers served = 41 Total 21,691 17,803

 International Journal of Production Research 4805

Table 10. Parameters.

Description Value

Generation 300
Population 100
Elite Count 20
Number of chromosomes 50
Crossover Probability 0.8
Crossover Type One Point
Chromosome Mutation Probability 0.02
Random Selection Probability 0.01
Mutation Function Gaussian
Convergence Tolerance 1 e 6
Initial Penalty 10
Penalty Factor 100
Constraint Penalty Fixed, 1e 10

Average volume per mile: It shows the average of volume per mile delivered by all vehicles.
X
AVpm Vno =Distance travelled=Total number of vehicles (11)
The current study focuses on an SME. Such enterprises typically operate with limited resources and capabilities. Every
decision that increases a rms prot, reduces cost or improves customer service will help the enterprise to beat the
competition. From the enterprise point of view, therefore, cost, prot and service are the major performance indicators.
Retailers and suppliers are interested in lowering their costs and improving prots. From a logistics point of view, the
aim is to minimise volume per mile or average volume per mile. The bullwhip has to be minimised in order to avoid

Table 11. GA model results.

Vehicle Customer Demand Actually Vehicle Customer Demand Actually

no. no. Location quantity supplied no. no. Location quantity supplied

1 47 (2.7, 0.5) 809 266 2 15 (7.3, 12.3) 528 528

1 46 (1.4, 1.3) 647 647 2 14 (7.8, 12.2) 523 523
1 45 (3, 2) 501 165 2 16 (5.3, 10.7) 480 480
1 44 (3, 3) 462 152 2 33 (6.8, 8.7) 428 428
1 43 (2, 5.5) 503 165 2 32 (8.9, 8.7) 412 412
1 42 (0.9, 4.9) 591 591 2 31 (8.2, 6.3) 561 185
1 41 (1.6, 3.4) 705 232 2 48 (2.3, 0.5) 816 269
1 40 (5, 4) 762 251 2 28 (6.2, 2) 301 99
1 39 (4, 2) 661 661 3 30 (7.7, 6.3) 631 631
1 38 (4.3, 0.2) 451 148 3 29 (7.7, 4.8) 476 127
1 37 (6.3, 1.2) 342 342 3 22 (5.9, 0.8) 496 496
1 36 (7.6, 1.6) 444 146 3 27 (7.2, 0.2) 353 353
1 2 (1.1, 5.3) 510 510 3 26 (7.2, 2) 341 341
1 3 (0.5, 5.3) 433 433 3 25 (6.1, 3) 588 588
1 35 (4.5, 6.5) 592 592 3 24 (5.5, 3) 462 462
1 34 (5.8, 6.5) 569 187 3 23 (4.7, 2.5) 395 395
1 4 (0.5, 8.6) 443 443 3 18 (4.4, 0.1) 288 288
2 6 (2, 15) 414 136 3 21 (4.8, 0.8) 591 591
2 5 (1, 15) 477 477 3 19 (3.8, 1) 349 349
2 10 (0.1, 15.8) 502 502 3 20 (3.2, 1) 513 513
2 11 (0.5, 15.8) 500 500 3 17 (3.4, 3.4) 370 87
2 7 (1, 15.5) 296 296 3 1 (0, 2.5) 555 555
2 9 (0.5, 17) 388 388 3 49 (1.2, 1) 641 211
2 8 (1.3, 16.4) 275 90
2 12 (5, 15) 170 170
2 13 (5.5, 13.1) 508 508

Retailers served = 49 Total 24,053 17,909

4806 A.B. Borade and E. Sweeney

Table 12. Comparative results for service parameters (rst simulation).

Actual Service Service Average Total Volume/ Average

Approach demand Supply Difference level 1 level 2 Vn1 Vn2 Vn3 truckload (%) distance mile vol./mile

FUZZY 24,741 17,803 6938 0.71 0.65 5978 5991 5834 98.90 104.66 177.276 170.101
Simple 24,741 17,617 7124 0.71 0.74 5987 5699 5931 97.87 94.66 195.65 186.108
heuristic
Max usage 24,741 17,313 7428 0.69 0.62 5885 5981 5447 96.18 74.41 233.397 232.67
LIFO 24,741 17,699 7042 0.71 0.76 5853 5886 5960 98.32 89.36 201.928 198.064
FIFO 24,741 17,396 7345 0.70 0.74 5717 5785 5894 96.64 87.81 202.892 198.11
Equal 24,741 17,371 7370 0.70 0.69 5912 5555 5904 96.50 116.2 157.01 149.37
priority
GA 24,741 17,909 6832 0.72 0.76 5931 5991 5987 99.49 99.86 191.58 179.341

Table 13. Comparative results for cost and prot parameters (rst simulation).

Approach Retailers cost Suppliers cost Stock out cost Variable cost Total cost Retailers prot Suppliers prot

FUZZY 16912.85 194910.5 5203.5 105 211823.3 23143.9 63233.05

Simple heuristic 16736.15 193059.1 5343 95 209795.2 22902.1 62387.45
Max usage 16447.35 190029.5 5571 75 212122.8 22506.9 61009.05
LIFO 16814.05 193868.9 5281.5 90 210679.9 23008.7 62766.65
FIFO 16526.2 190864.2 5508.75 88 212987.1 22614.8 61377.85
Equal priority 16502.45 190630.2 5527 102 207132.6 22582.3 61249.35
GA 17013.55 195955.9 5121 100 212968.4 23281.7 63724.65

Table 14. Comparative results for Bullwhip and retailers served (rst simulation).

Retailer Supplier Retailers served

Approach Std Dev Mean Cin Std Dev Mean Cout Bullwhip Fully Partially Not at all

FUZZY 133.29 494.82 0.27 205.28 414.02 0.50 0.55 3 38 9

Simple heuristic 133.29 494.82 0.27 116.14 476.14 0.24 1.10 37 0 13
Max usage 133.29 494.82 0.27 102.92 558.48 0.18 1.46 31 0 19
LIFO 133.29 494.82 0.27 113.91 465.76 0.24 1.10 38 0 12
FIFO 133.29 494.82 0.27 135.33 470.16 0.29 0.94 37 0 13
Equal priority 133.29 494.82 0.27 140.72 361.9 0.39 0.69 0 48 2
GA 133.29 494.82 0.27 176.62 362.4 0.49 0.55 32 17 1

Table 15. Cost and service parameters (second simulation).

Details Values

Actual demand 24,049

Production capacity 20,000
Difference 4049
Number of retailers 50
Vehicle capacity 6000
Number of vehicles 4
Manufacturing cost/unit INR 9
Ordering cost/unit 0.85
Order processing cost/unit 0.4
Shipping cost/unit 3
Holding cost (retailer) 0.4
Holding cost (manufacturer) 0.6
Stock out cost/unit 0.9
Variable cost/km 1.5
 International Journal of Production Research 4807

demand amplication. Finally, the service levels delivered to the customer are also crucial. Ultimately, we need to
resolve the trade-offs between the various objectives. In the next section, we compare the performance of alternative
approaches using the various performance criteria described above.

5. Results and discussion

This study developed a DSS for taking inventory replenishment-related decisions. As shown in Figure 1, the simulation
starts with feeding in the details related to the number of retailers, their locations, average demand, specic demand,
costs and vehicle information. A screen shot of the DSS is shown in Figure 3. The retailers cluster is shown in Figure 4.
The location and demand details are as shown in Tables 1 and 2. These details are common for the rst and second sim-
ulations. The cost and other details for the rst simulation are shown in Table 3. The results delivered by the DSS for
the various approaches are shown in Tables 49. The best t obtained for GA based results is shown in Figure 5.

5.1 Demand fullment

Simple heuristics work on the principle discussed in Section 3.3.1. With this approach, we are able to serve 37 retailers
and cater for 71.2% of total demand. The delivery to each retailer, the vehicle used and the route are shown in Table 4.
The, maximum usage approach works on the principle discussed in 3.3.2. With this approach, we are able to serve 31
retailers and cater for 69.9% of total demand. The delivery to each retailer, the vehicle used and the route are shown in
Table 5. The next alternative is the LIFO approach which works on the principle discussed in Section 3.3.3. With this
approach, we are able to serve 38 retailers and cater for 71.5% of total demand. The delivery to each retailer, the vehicle
used and the route are shown in Table 6. The next variant the FIFO approach works on the principle discussed in
Section 3.3.4. With this approach, we are able to serve 37 retailers and cater for 70.3% of total demand. The delivery to
each retailer, the vehicle used and the route are shown in Table 7. The equal priority approach works on the principle
discussed in Section 3.3.5 and shows service to 48 retailers by fullling 70.2% of total demand (see Table 8). The fuzzy
approach as discussed in Section 3.3.6 served 41 retailers and catered for 71.9% of total demand. Lastly, Table 9 shows

Table 16. Results of GA model (second simulation).

Vehicle Customer Demand Actually Vehicle Customer Demand Actually

no. no. Location quantity supplied no. no. Location quantity supplied

1 37 6.3, 1.2 375 165 3 35 4.5, 6.5 350 350

1 38 4.3, 0.2 350 133 3 17 3.4, 3.4 320 320
1 1 0, 2.5 600 600 3 20 3.2, 1 480 480
1 2 1.1, 5.3 540 540 3 19 3.8, 1 390 390
1 3 0.5, 5.3 720 720 3 18 4.4, 0.1 270 270
1 4 0.5, 8.6 700 700 3 21 4.8, 0.8 450 450
1 6 2, 15 600 600 3 22 5.9, 0.8 425 425
1 5 1, 15 470 470 3 28 6.2, 2 650 216
1 10 0.1, 15.8 500 500 3 40 5, 4 480 480
1 11 0.5, 15.8 545 545 4 27 7.2, 0.2 624 624
2 7 1, 15.5 650 650 4 26 7.2, 2 360 360
2 9 0.5, 17 275 275 4 25 6.1, 3 675 675
2 8 1.3, 16.4 600 600 4 24 5.5, 3 475 475
2 12 5, 15 550 550 4 23 4.7, 2.5 380 380
2 13 5.5, 13.1 570 570 4 47 2.7, 0.5 460 188
2 15 7.3, 12.3 420 420 4 48 2.3, 0.5 370 151
2 14 7.8, 12.2 500 500 4 49 1.2, 1 410 168
2 16 5.3, 10.7 550 225 4 50 0.8, 0 380 155
2 33 6.8, 8.7 545 545 4 46 1.4, 1.3 435 178
2 32 8.9, 8.7 500 500 4 45 3, 2 460 188
2 36 7.6, 1.6 425 155 4 44 3, 3 410 168
3 31 8.2, 6.3 470 172 4 43 2, 5.5 435 435
3 30 7.7, 6.3 420 420 4 42 0.9, 4.9 540 121
3 29 7.7, 4.8 575 575 4 41 1.6, 3.4 470 192
3 34 5.8, 6.5 420 420 4 39 4, 2 460 460
Total 24,049 19,849
 4808

Table 17. Comparative results for service parameters (second simulation).

Actual Service Service Average Total Volume/ Average vol./

Approach demand Supply Difference level 1 level 2 Vn1 Vn2 Vn3 Vn4 truckload distance Mile Mile

FUZZY 24,049 19,573 4476 0.81 0.79 4862 4887 4837 4987 0.98 98 227.646 235.88
Simple 24,049 19,119 4930 0.79 0.78 4805 4660 4699 4955 0.96 138 207.8152 241.6616
heuristic
Max usage 24,049 19,489 4560 0.81 0.76 4959 5000 4700 4830 0.97 114 256.4342 280.5283
LIFO 24,049 19,704 4345 0.81 0.78 4990 4960 4965 4789 0.99 138 210.9674 243.4552
FIFO 24,049 19,274 4775 0.8 0.78 4810 4785 4919 4760 0.96 124.5 232.2169 271.671
Equal priority 24,049 19,036 5013 0.79 0.78 4664 4968 4922 4482 0.95 95 179.6697 235.88
A.B. Borade and E. Sweeney

GA 24,049 19,849 4200 0.82 0.63 4973 4990 4968 4918 0.99 130.5 228.1494 239.4091
 International Journal of Production Research 4809

Table 18. Comparative results for cost and prot parameters (second simulation).

Simulation 2 Retailers cost Suppliers cost Stock-out cost Variable cost Total cost Retailers prot Suppliers prot

FUZZY 24466.25 258575.4 8020.8 98 287034.1 14759.75 79748.85

Simple heuristic 23898.75 253,122 4437 138 277020.8 14339.25 76680.75
Max usage 24361.25 257,575 4104 114 281936.3 14616.75 78610.25
LIFO 24261.25 256365.5 3910.5 138 280626.8 14556.75 78439.75
FIFO 24092.5 254,984 4297.5 124.5 279076.5 14455.5 77492.5
Equal priority 23,920 252362.2 4421.7 95 277204.7 14,352 77733.8
GA 24811.25 261947.5 7542 130.5 286758.8 14886.75 80447.75

Table 19. Comparative results for bullwhip (second simulation).

Retailer Supplier Retailers served

Approach Std Dev Mean Cin Std Dev Mean Cout Bullwhip Fully Partially Not at all

FUZZY 106.81 480.98 0.22 182.46 491.46 0.37 0.60 4 40 6

Simple heuristic 106.81 480.98 0.22 99.42 504.79 0.20 1.13 39 0 11
Max usage 106.81 480.98 0.22 91.05 523.54 0.17 1.28 38 0 12
LIFO 106.81 480.98 0.22 95.22 447.5 0.21 1.04 39 0 11
FIFO 106.81 480.98 0.22 110.83 483.8 0.23 0.97 39 0 11
Equal priority 106.81 480.98 0.22 105.53 421.41 0.25 0.89 0 48 2
GA 106.81 480.98 0.22 167.13 445.33 0.38 0.59 35 15 0

the results for the GA-based approach using the procedure discussed in Section 3.3.7. With this approach, 49 retailers
are served representing 72.3% of total demand.
As shown in Table 3, total demand is 24741units and possible production is 18,000 units with the objective of
satisfying the maximum number of retailers. With any approach, we could serve at most 50 retailers, and the maximum
possible demand fullment is 72.7%. From the above results, it is quite clear that traditional approaches perform rela-
tively poorly. The fuzzy approach shows an improvement with more retailers served and a higher percentage of total
demand fullled. However, best results are obtained with the GA-based approach, which serves the highest number of
retailers and fulls the highest percentage of total demand. The parameters adopted for this approach are provided in
Table 10 and the results of GA based approch are shown in Table 11.
In this study, we adopted service, prot and bullwhip as system performance measures. The results are shown in
Tables 1214.

5.2 Customer service

The objective is to maximise the number of retailers served. From Table 12, it is clear that the maximum deviation of
supply and actual demand occurs with the maximum usage approach, with the minimum deviation for the GA approach.
The service levels and vehicle utilisation are also best with the GA-based approach. However, total distance travelled is
minimum for the maximum usage approach, and maximum using the equal priority approach. Volume per mile is best
for the maximum usage approach and poorest with the equal priority model. Thus, with the GA approach, we were able
to achieve high service levels and vehicle utilisation.

5.3 Prot
Prot is a major performance indicator in any business. The supply chain manager has to decide how prot can be
improved whilst keeping all other factors constant. The VMI strategy is successful if it delivers reasonable prot to
retailers and suppliers. In this study, we have considered stockout costs incurred by the manufacturer. Increases in stock-
outs may erode prot margins; hence, we expect minimum stockouts. From Table 13, it is clear that the GA approach
helps to achieve maximum prot and minimum stockouts. Results from the fuzzy approach are also positive. However,
the worst performance is found with the maximum usage approach.
 4810

Table 20. MAPPAC analysis (rst simulation).

DATA: MIN MIN MIN MAX MAX MAX MAX MAX MAX MIN
Approach Retailers cost suppliers cost Total cost Retailers prot Suppliers prot Service level 1 Service level 2 Average vol/mile Volume/mile Bullwhip

FUZZY 16912.85 194910.5 211823.3 23143.9 63233.05 0.71 0.65 177.276 170.1009 0.54
Simple heuristic 16736.15 193059.1 209795.2 22902.1 62387.45 0.71 0.74 195.6502 186.1082 1.104341
Max usage 16447.35 190029.5 206476.8 22506.9 61009.05 0.69 0.62 233.397 232.6703 1.4617
LIFO 16814.05 193868.9 210679.9 23008.7 62766.65 0.71 0.76 201.9279 198.064 1.10
FIFO 16526.2 190864.2 207390.4 22614.8 61377.85 0.70 0.74 202.8919 198.1096 0.94
Equal priority 16502.45 190630.2 207132.6 22582.3 61249.35 0.70 0.69 172.7155 170.5547 0.69
GA 17013.55 195955.9 212968.4 23281.7 63724.65 0.72 0.76 191.5795 179.3411 0.55
A.B. Borade and E. Sweeney

Weights 0.05000 0.05000 0.05000 0.15000 0.15000 0.10000 0.10000 0.10000 0.10000 0.15000
 International Journal of Production Research 4811

Table 21. MAPPAC ranking for rst simulation.

Class Alternative Upper Lower

3 FUZZY 3 3
1 GA 1 1
2 LIFO 2 2
4 FIFO 4 4
5 Simple heuristic 5 5
6 Equal priority 6 7
Max usage 7 6

Table 22. MAPPAC analysis (second simulation).

DATA MIN MIN MIN MAX MAX MAX MAX MAX MAX MIN
Retailers Suppliers Total Retailers Suppliers Service Service Average Volume/
Approach cost cost cost prot prot level 1 level 2 vol/mile mile Bullwhip

FUZZY 24466.25 258575.4 287034.1 14759.75 79748.85 0.81 0.79 227.646 235.88 0.598144
Simple 23898.75 253,122 277020.8 14339.25 76680.75 0.79 0.78 207.8152 241.6616 1.127514
heuristic
Max usage 24361.25 257,575 281936.3 14616.75 78610.25 0.81 0.76 256.4342 280.5283 1.276894
LIFO 24261.25 256365.5 280626.8 14556.75 78439.75 0.81 0.78 210.9674 243.4552 1.043638
FIFO 24092.5 254,984 279076.5 14455.5 77492.5 0.8 0.78 232.2169 271.671 0.969379
Equal 23,920 252362.2 277204.7 14,352 77733.8 0.79 0.78 179.6697 235.88 0.886776
priority
GA 24811.25 261947.5 286758.8 14886.75 80447.75 0.82 0.63 228.1494 239.4091 0.591715
Weights 0.05000 0.05000 0.05000 0.15000 0.15000 0.10000 0.10000 0.10000 0.10000 0.15000

5.4 Bullwhip
VMI represents an effective inventory sharing mechanism which mitigates the problem of information distortion with
minimum investment. The relative bullwhip effect associated with the various approaches used by the authors is com-
pared in Table 14. Maximum bullwhip is found for the maximum usage approach, with minimum for the fuzzy and GA
approaches. It also shows a comparison of the patterns of demand fullment. This demonstrates that with simple heuris-
tics, maximum usage, LIFO and FIFO approaches, the manufacturer can serve 3138 retailers. On the one hand, the
positive thing is that these retailers are served 100% but, on the other hand, the remaining retailers are not served at all.
The pattern of demand fullment is slightly improved using the equal priority and fuzzy approaches. With the equal pri-
ority approach, 48 retailers are served but none is fully served. With the fuzzy approach three retailers are served fully,
38 partially served and nine not served at all. The results are better using the GA-based approach. It serves 32 retailers
fully and 17 partially. This pattern would likely help with long term customer retention.

Table 23. MAPPAC ranking (second simulation).

Class Alternative Upper Lower

2 FUZZY 2 2
1 GA 1 1
3 Max usage 4 3
4 LIFO 3 5
5 FIFO 6 4
6 Equal priority 5 6
7 Simple heuristic 7 7
4812 A.B. Borade and E. Sweeney

5.5 Verifying of results

The results were corroborated using a second simulation. The cost and service parameters for the second simulation are
shown in Table 15, and the results for the GA-based approach are shown in Table 16. From Tables 1719, it is clear
that the GA approach performs better on most of the performance measures. In the second simulation run, the GA
approach does not yield the minimum stockout as in the rst run; however, it does give the maximum service levels,
vehicle utilisations, prot and retailers served, as well as the minimum bullwhip. From the above results, it is observed
that minimum distance is achieved using the maximum usage approach in the rst simulation and the equal priority
approach in the second simulation. Volume per mile is best for the equal priority approaches in both simulation runs.
However, for other parameters the GA-based approach shows better results. Using a multicriterion analysis of
preferences by means of pairwise actions and criterion comparisons (MAPPAC), we can assign relative importance to
the various performance parameters and identify the optimum approach for the system. From Tables 2023 and from
the results obtained using the MAPPAC analysis, our proposition that the GA-based approach provides best results is
clearly supported.

6. Conclusions
Higher levels of supply chain integration requires better information sharing to align operational activities (e.g. ordering
and payment systems, production and replenishment planning) between suppliers and customers as well as improved
coordination of strategic activities (e.g. relationship building and joint improvement activities) which create customer
supplier intimacy (Swink, Narasimhan, and Wang 2007). An information sharing mechanism like VMI fosters coordina-
tion among supply chain members and improves the overall performance of the supply chain network.
GAs are naturally suited to the solution of maximisation problems. Our research indicates that the proposed GA-
based model shows the best results when compared with other, more traditional, approaches. The model helped to serve
the maximum number of retailers as compared to these traditional approaches. It also improved inventory allocation to
retailers in such a way that production capacity is fully utilised. In this problem, a single product, and multiple retailers
with xed locations, was considered. The routes were established later according to the clusters formed. Further work
would aim to develop an algorithm which can consider multiple products, and multiple retailers with variable locations.
Future work should also focus on establishing routes based on consideration of replenishment time windows. Many
real-world problems exhibit similar characteristics. Under varying demand, limited production and higher demand condi-
tions meticulous DSS may prove useful. Nevertheless, the work described in this paper could be utilised by the SMEs
to improve decision-making quality, as well as by researchers as a robust basis for further development of our under-
standing of the issues under investigation.
The study presented in this paper provides an example of where a simulation-based DSS was adopted in a VMI sup-
ply chain. The supply chain of a bread-manufacturing company was selected to successfully validate and demonstrate
the proposition. The GA-based approach helps to improve prot, vehicle utilisation and service levels as well as reduc-
ing the bullwhip effect. The results show that the GA-based approach outperformed not only the traditional approaches
but also the fuzzy-based approach. The study shows that performance enhancement can be achieved under the specied
circumstances, and that implementation of simulation-based DSS for VMI decisions can yield positive results, even in a
small enterprise such as the focal company in the current study.

Table A. Assumptions.

Assumptions:

(1) The manufacturer produces one type of product with a limited production capacity, and supplies it to its multiple retailers
(2) The inventory replenishment decision is taken by manufacture
(3) The demand is higher than production capacity
(4) The demand is uncertain
(5) Unsatised demand is stock out and stock out cost is taken in to account while calculating supply chain cost
(6) Vehicles are identical and hence their capacities are the same
(7) Vehicle routes start from and terminate at the depot, hence while calculating total distance from the depot is ignored
(8) A cluster of retailers is visited by one vehicle
(9) Inventory replenishment was done on a daily basis, i.e. Each retailer was visited daily
 International Journal of Production Research 4813

Table B. Notations.

Notation Details

Rtc Retailers total cost

Roc Retailers ordering cost
Rhc Retailers holding cost
Stc Suppliers total cost
Smc Suppliers manufacturing cost
Sopc Suppliers order processing cost
Ssc Suppliers shipping cost
Shc Suppliers holding cost
Ssoc Suppliers stock-out cost
Svc Variable cost
Rsp Retailers selling price
Ssp Suppliers selling price
Rp Retailers prot
Sp Suppliers prot
N Number of retailers
Rno Retailer number
Vno Truck load by vehicle number
Rt Route
B Bullwhip
Cout Ratio of deviation of demand and mean demand for supplier
Cin Ratio of deviation of demand and mean demand for retailer
Rinv Required Inventory
Sinv Supplied Inventory
NS Number of retailers served
Nns Number of retailers not served
Service level
Weighted service level
Vpm Volume per mile
AVpm Average volume per mile

Although, we have adopted a novel approach, further work should focus on developing alternative optimisation tech-
niques which may give improved results in terms of minimising the bullwhip effect, minimising distance, increasing
prot and improving service levels. The work could be extended by adding more parameters such as travel time, time
for pickup and delivery operations at each point, driver capability, number of retailers and multiple products. Potentially
fruitful future research could also focus on the development of hybrid fuzzy-GA approaches.

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 International Journal of Production Research 4815

Appendix 1
1. Flowchart for simple heuristics algorithm.

2. Flowchart for maximum usage algorithm.

4816 A.B. Borade and E. Sweeney

3. Flowchart for last in rst out algorithm.

4. Flowchart for rst in rst out algorithm.

 International Journal of Production Research 4817

5. Flowchart for equal priority algorithm.

6. Flowchart for fuzzy approach based algorithm.

4818 A.B. Borade and E. Sweeney

7. Flowchart for routing algorithm.

Start

swpt1,swpt2,swptlo,swpthi,

Swpt1=floor(npts*rand)+1

Swpt2=floor(npts*rand)+1

Swptlo=min(swpt1,sept2)

Swpthi=max(swpt1,sept2)

Order=1:npts

order(swptlo:swpthi)=order(s
wpthi:-1:swptlo)

Pnew=a(order)

lennew=LocalPathLength(pne
w,distmatrix);

If

lennew<len
yes

P=pnew No

Len=lennew

drawflag=1

Stop
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