An Efficient Heuristic for the Two-echelon Multi-vendor Multi-buyer Optimization Problem

This paper presents an integrated model to simultaneously solve the multi-vendor multi-buyer and the transportation problems which deals with finding an optimal delivery schedule to the buyers and the corresponding optimal production lot sizes. The objective is to minimize the joint total cost of ordering, inventory holding, set up and transportation. In the integrated model, the vendor transfers a batch to a buyer as soon as its manufacture is finished. Since the problem is formulated into an integer nonlinear programming model, a heuristic based on the non-linear threshold algorithm is proposed to find a pre-optimal solution of the problem. The results show that the pre-optimal solution can be obtained quickly using the proposed heuristic.