INVENTORY-MANAGEMENT-PROJECT 2 .docx - Course: Inventory...

Course: Inventory Management
Instructor: Nguyen Van Hop

Course: Inventory Management
Instructor: Nguyen Van Hop
I. Manage & plan route for blood product supply under uncentainty usage case
1. System Description
The aim of the porject is to plan delivery routes of blood products to hospital in Eastern Austria
by Austrian Red Cross (ARC). Since the blood product demands are uncentainty & fluctuate due
to emergency cases, stochastics model is proposed and replaced the initial deterministic model
which caused the product shortfall problem.
The solution is using external sampling to convert The two-stage stochastic optimization
problem, which is integrated by an Integer Programming approach and a Variable Neighborhood
Search (VNS) approach, into a deterministic optimization problem.
The system goal is to build up a 2-week period supply plan that ensures the availability of
vehicles, optimization of quantity per trip, number of trip, fixed cost, variable cost and error
between expecting and realistic number of emergency trip.
In this report, we will show asystematical application of theVMI (vendor managed inventory)
for a supply chain with stochastic demand. By adopting vendor managed inventory, the
organizations involved can be gained through cost reduction based on numerical analysis and
Lingo optimization software. ealistic number of emergency trip.
2. Problem Statement
2.1 Perishable goods problems
Since blood is a perishable good, the inventory of blood products has to be managed carefully to
avoid spoilage. Therefore, the blood bank has to regularly supply a set of hospitals with certain
products at different rates. Any delivery policy should be such that no shortfall of products
occurs at the hospitals, but at the same time spoilage of products is kept at a minimum.
2.2 Blood product shortfall due to deterministic forcase problem
The initial attempt is to use deterministic blood product usage by that forecast demands based on
previous data of recent weeks or months, then build up at a constant rate to meet acceptable
range of predicted known demands ( mainly appointed surgeries). However, lack of breath view
in the long run, ARC has faced the blood shortage under emergency case at hospitals. In the

Course: Inventory Management
Instructor: Nguyen Van Hop
reality, demands are supposed to be a random variable on a bounded interval due to unexpected
case; therefore, it is unfeasible to create a cost-savings 2-week period plan to adapt accurately
blood product without underage supply. In short, the problem is modeled as a nonlinear integer
program and methods for the deterministic vehicle routing problem are extended to handle the
random demand.
The improved proposed model is to used stochastic demand, and two solution approaches are
introduced:
 Integer Programming approach
 Variable Neighborhood Search (VNS) approach
2.3 Stochastic variants of inventory routing problems
Optimize cost problem
When usage is stochastic (a random variable supported on a bounded interval), the demand is