Improving routing and scheduling decisions at a distributor of industrial gasses

This paper investigates cyclical inventory replenishment for a company's regional distribution center that supplies, distributes, and manages inventory of carbon dioxide (CO2) at over 900 separate customer sites in Indiana. The company previously experienced high labor costs with excessive overtime and maintained a regular back-log of customers experiencing stockouts. To address these issues we implemented a three-phase heuristic for the cyclical inventory routing problem encountered at one of the company's distribution centers. This heuristic determines regular routes for each of three available delivery vehicles over a 12-day delivery horizon while improving four primary performance measures: delivery labor cost, stockouts, delivery regularity, and driver-customer familiarity. It does so by first determining three sets of cities (one for each delivery vehicle) that must be delivered to each day based on customer requirements. Second, the heuristic assigns the remaining customers in other cities to one of the three “backbone routes” determined in phase 1. And third, it balances customer deliveries on each daily route over the schedule horizon. Through our methodology, we were able to significantly reduce overtime, driving time, and labor costs while improving customer service.