A decomposition framework for managing inventory and distribution of fluid products by an order-based-resupply methodology

•The method provides a number of shifts to satisfy the demand of fluid products by customers while considering inventory constraints on plants.•A decomposition method based on column generation is developed to solve the problem.•Solutions to different examples, generated by using realistic data, are presented.

Fluid chemicals are usually distributed according two main methodologies; the vendor managed inventory modality and the order-based re-supply modality. In this paper, the problem of optimizing the delivery of fluids by tanker trucks on a daily basis according the order-basedresupply methodology is addressed. According to this modality, replenishment orders are triggered by customers specifying the quantity of fluids and time-windows within which the delivery must be fulfilled. The objective is to minimize the replenishment cost while meeting customers orders over the pre-defined time-horizon. An Integer Program modelling the problem is proposed and used to develop an incomplete branch & price procedure with the purpose of finding near optimal solutions to instances arising from realistic examples. A computational study on realistic examples with different topologies demonstrates that the method is effective and able to provide solutions with integrality gaps below the 16% threshold for instances with 120 orders.