GOALI: Inventory Routing in the Chemical Industry

University Of Wisconsin-Madison, Madison WI

Investigators

Abstract

ABSTRACT PI: Christos T. Maravelias(1), Jose Pinto(2), Larry Megan(2) Institutions: (1) University of Wisconsin-Madison, (2) Praxair Inc. Proposal Number: 1264096 Title: GOALI: Inventory Routing in the Chemical Industry To improve the efficiency of their supply chains, vendors in a wide range of manufacturing sectors switch to vendor-managed inventory (VMI) practices, where the vendor chooses the timing and volume of its deliveries while ensuring that his customers will not run out of product. If implemented effectively, VMI policies can lead to substantial improvements in the efficiency and reliability of the supply chain, because the vendors make more efficient use of their resources. Furthermore, since distribution costs often represent 30-50% of total operating costs, the implementation of VMI policies can lead to substantial savings. However, executing a VMI policy effectively, especially when the distribution network relies on trucks and trailers, is not a trivial task. It requires the integration of inventory control and distribution routing, two problems that have traditionally been dealt with separately. The goal of this project is to develop optimization-based models and solution methods for this integrated problem, the so-called inventory routing (IR) problem. Intellectual Merit The intellectual merit of this project lies in the development, analysis, assessment, and implementation of an optimization-based framework for the modeling and solution of broad, ubiquitous classes of inventory routing problems. In developing this framework, The PIs will focus on addressing the following three challenges: 1. Formulation of new mixed-integer programming (MIP) models that account for all special characteristics and constraints in IR problems. 2. Development of effective solution methods for large scale MIP models for IR problems. 3. Assessment of the proposed methods using real-world data, and implementation at Praxair to assess logistics efficiency, reliability, and safety. Transformative Potential If successful, this project will result in the first general optimization-based approach to inventory routing problems arising in chemical manufacturing supply chains. Specifically, it will be the first approach to account for all driving regulations as well as all customer restrictions. If implemented, it has the potential to lead to significant improvements in the distribution networks of a wide variety of chemical companies. Broader Impacts First, the research could improve the efficiency of the industrial gas supply chain, as well as supply chains in other manufacturing sectors, thus increasing the competitiveness of American companies. Second, it has the potential to lead to reductions in (i) the overall energy usage in energy intensive sectors such as industrial gases and (ii) in greenhouse gas emissions. Third, the results of this research will be used to develop educational material, as well as demonstrations for outreach activities. Finally, through the REU in Chemistry and Chemical and Biological Engineering at the University of Wisconsin - Madison, The PI will hire undergraduate students to work on the project.