68 Supply Chain Management and Logistics
production capacities. The objective function includes the inventory holding
cost, the truck loading and dispatch cost, mileage costs, and handling costs.
The proposed solution methodology decomposes the integrated problem
into two subproblems—inventory and routing problems—and they are iter-
atively solved until either no further improvement is found or the maximum
number of iterations is reached. The routing subproblem is solved period by
period. As a preprocessing, they use full-truck load (FTL) shipments with a
route having a single destination for customers with large order quantities,
and use less-than-truck load (LTL) shipments with truck routes for other cus-
tomers. They then use a savings algorithm ...