A heuristic method for the combined location routing and inventory problem

The combined location routing and inventory problem (CLRIP) is used to allocate depots from several potential locations, to schedule vehicles’ routes to meet customers’ demands, and to determine the inventory policy based on the information of customers’ demands, in order to minimize the total system cost. Since finding the optimal solution(s) for this problem is a nonpolynomial (NP) problem, several heuristics for searching local optima have been proposed. However, the solutions for these heuristics are trapped in local optima. Global search heuristic methods, such as tabu search, simulated annealing method, etc., have been known for overcoming the combinatorial problems such as CLRIP, etc. In this paper, the CLRIP is decomposed into two subproblems: depot location-allocation problem, and routing and inventory problem. A heuristic method is proposed to find solutions for CLRIP. First of all, an initial solution for CLRIP is determined. Then a hybrid heuristic combining tabu search with simulated annealing sharing the same tabu list is used to improve the initial solution for each subproblem separately and alternatively. The proposed heuristic method is tested and evaluated via simulation. The results show the proposed heuristic method is better than the existing methods and global search heuristic methods in terms of average system cost.