Cost and reliability analyses for the vehicle routing problem

Abstract

The vehicle routing problem (VRP) is one of the central problems in logistics and supply chain management. In this paper, we present a simulation approach for cost and reliability analyses for the vehicle routing problem with stochastic demands. The objective of this study is to provide a method in evaluating the reliability and the associated cost of a VRP solution by using simulation. First, a deterministic variant of the capacitated vehicle routing problem (CVRP) is solved by using an ant colony optimization algorithm. Then the solution is evaluated under stochastic demands for the incurred cost and reliability. The reliability of a solution is estimated based on the number of route failures where customers' demands exceed the remaining capacity of the vehicles. When a failure occurs, a recourse action must be taken to fulfill the customer's requirement, which in turn increases the operating cost. We provide experiments for the proposed method by using standard benchmark problems for the CVRP. Computational results are given for the estimates by using a 95% confidence interval (CI) with 1% accuracy.