g11 Project Inventory Official

INTERNATIONAL UNIVERSITY
VIETNAM NATIONAL UNIVERSITY HCMC (IU-VNU)
FINAL REPORT
COURSE: INVENTORTY MANAGEMENT
Vendor managed inventory for environments with stochastic
product usage
Instructor: Nguyen Van Hop
Teacher assistant: Pham Tuan Anh
Group 11 – Thursday Morning
CONTRIBUTION
Trương Ngọc Lê Khanh IELSIU17037 100
Nguyễn Trịnh Thảo Huyền IEIEIU17023 100
Trần Thị Hoàn Châu IELSIU18251 100
Hồ Anh Phú Đôn IELSIU17005 100
Date: Dec 27th , 2020

Contents
1. ABSTRACT ................................................................................................................... 3
2. INTRODUCTION .......................................................................................................... 3
2.1 Problem Summary............................................................................................................3
2.2 Solution Summary ............................................................................................................3
3. BACKGROUND (Materials used and relevant literature)................................................ 3
4. PROBLEM DESCRIPTION AND SOLUTION STRATEGIES....................................... 4
5. SOLUTION APPROACHES .......................................................................................... 6
5.1 Integer programming (IP) model ......................................................................................6
5.2 Recourse action............................................................................................................... 10
5.2.1 First recourse action – delivery quantity adjustment ............................................................... 10
5.2.2 Second recourse action – out-and-back emergency deliveries .................................................. 13
5.2.3 Third recourse action .............................................................................................................. 17
5.2.4 Fourth recourse action ............................................................................................................ 21
6. IMPLENTATION AND TEST (IP) .............................................................................. 25

6.1 Computational Study ...................................................................................................... 25
6.2 Algorithm Explanation ................................................................................................... 25
6.2.1 Integer Programming.............................................................................................................. 25
6.2.2 Recourse Actions..................................................................................................................... 29
7. CONCLUSION ............................................................................................................ 32
8. REFERENCE.............................................................................................................. 32
1. ABSTRACT
Based on an integer programming model built in Vera Hemmelmayr’s research of the
delivery routes planning for the blood products supply to hospital by a blood bank, we try
to run it in Cplex with given information and self-figured data. This is a sampling-based
approaches which helps with organizing cost-effectively the delivery of blood products to
hospitals. An extensive computational study shows the efficacy of the two approaches
and highlights the impact of product usage uncertainty on the resulting delivery plans.
2. INTRODUCTION
2.1 Problem Summary
In the paper, the researchers consider the specific problem of vendor managed
inventory resupply policy for the delivery of blood products to hospitals in Eastern
Austria by the Austrian Red Cross (ARC). The main idea is that the ARC needs to
develop two-week plans for practical purposes, as it allows advanced notification of
volunteers and guarantees the availability of appropriate delivery vehicles. In
Hemmelmayr et al., an initial assessment of the ARC's benefits of shifting to vendor-
managed inventory supply is addressed (in press). This initial evaluation was
conducted assuming the hospitals' documented and deterministic usage of blood
products. For an initial evaluation, this is appropriate, but it is of course, not absolutely
true. Blood product needs can be estimated reasonably accurate for planned surgeries,
but it is far harder to predict blood product needed for emergency cases. Therefore, in
this paper, in the presence of stochastic product utilization, it focuses on analyzing
vendor-managed inventory resupply policies.
Another problem is, if product usage is stochastic, a cost-effective plan that is
guaranteed to be feasible for every possible realization of product usage in a 2-week
period can no longer be created. Therefore, during the 2-week period, it is appropriate
to implement various recourse policies for managing product shortfalls as stated in the
paper. However, in this project, we will not be discussing about the recourse policy.
2.2 Solution Summary
Two solution approaches are implemented in Hemmelmayr et al. (in press), an
integer programming approach and a Variable Neighborhood Search (VNS) approach.
The researchers expand both methods so that stochastic product usage can be handled,
using external sampling in both cases to turn the two-stage stochastic optimization
question into a problem of deterministic optimization.
3. BACKGROUND (Materials used and relevant literature)

Most of the information is extracted from the research Vera Hemmellmayr (in press),
most specifically the integer programming IP model.
As this is a linear problem, In IP, we used the help of Cplex to write and run the model.
However, as data is not provided, we have settled for self-figured data in order to test the
model. Besides that, other given information would still be selectively used.
4. PROBLEM DESCRIPTION AND SOLUTION STRATEGIES
In the treatment of their patients, hospitals utilize a variety of products. Many of these
items have a limited life cycle, most importantly blood products, and their production and
inventory must therefore be carefully controlled. For hospitals, blood products are
important as they are required for operations and for the care of patients with chronic
diseases, such as cancer patients. As a result, blood products are routinely delivered to
hospitals to ensure that a sufficient supply of the blood products needed is available.
Thus, there occurs a problem for the blood bank to guarantee regular deliveries of blood
conserves (or other certain products) to its set of customers (hospitals, clinics, medical
institutes) who consume at different rates. Given that, with any delivery policy created, it
should include no shortfalls of products to the customer as well as minimize the time
spoilage of products, especially with medical products where spoilage time is considered
to be crucial. Noted the size of a bag with a blood product is very small, vehicle capacity
is never restricting.
Blood product delivery planning is complicated by the stochastic design of the usage of
blood products due to emergencies. The emphasis of this paper is handling the
stochasticity of blood product usage. Stochasticity in product usage makes it difficult to
ensure the supply of blood products as well as monitor the spoilage possibilities. When
the blood usage is deterministic, it is easier to calculate the total product usage during the
spoilage period and making certain that inventory at a hospital never exceeds this
amount. Hence, spoilage can be simply avoided. Similarly, when the usage is stochastic
(a random variable supported on a bounded interval), spoilage can be avoided by
summing the minimum daily usage quantities during the spoilage duration and keeping
the inventory at a hospital below this quantity. This will, however, possibly result in
repeated hospital visits, which will raise delivery costs dramatically. In order to balance
the delivery costs and spoilage costs, it is decided to limit the risk of spoilage to a
maximum of 5%. More precisely, during the spoilage era, product usage is sampled and
the hospital's maximum inventory level is taken as the 5% quantile; we denote this
inventory level with Si and refer to it as the spoilage capacity.
More importantly, when usage is stochastic it becomes prohibitive or maybe even

impossible to construct 2-week delivery plans that guarantee no product shortage.
Therefore, some recovery or recourse mechanism needs to be created to handle shortages
if they occur. Recourse can be quite expensive as they are organized short-notice hence
expected recourse cost also needs to be evaluated in the 2-week delivery plan.
Consider a two-stage stochastic program with recourse: given a set of first stage decisions
(regular delivery decisions in our case) and a particular realization, from collected
sample, the second stage can be computed: recourse decisions and costs. We have a
deterministic problem for each realization in the sample. The standard However, in this
report, we focus on elaborating the regular/planned delivery decisions and the
minimization of the cost of planned deliveries. Assume that product usage at the hospitals
is independently distributed and that at the beginning of the day information about the
inventory of each hospital is available at the distribution center.
We consider a two-stage stochastic program with recourse. Given a set of first stage
decisions (regular delivery decisions in our case) and a particular realization, from our
sample, we can compute second stage or recourse decisions and costs. We have a
deterministic problem for each realization in the sample. The standard objective function
of a recourse optimization problem is 𝑔(𝑥) + 𝐸𝜔 [𝑓(𝜔, 𝑥)], where x represents first stage
decision variables and x represents a realization of the random variables. In our case, the
first term corresponds to the cost of the regular deliveries, while the second term is the
cost of the recourse actions (which depend on both the regular delivery decisions and the
product usage realization), which we approximate using sampling. More precisely, the
cost of the recourse action is evaluated by drawing R samples and averaging their costs,
1
i.e., ∑𝑅𝑟−1 𝑓(𝜔𝑟 , 𝑥). We consider four recourse actions, defined in more detail below.
𝑅
We assume that product usage at the hospitals is independently distributed and that at
the beginning of the day information about the inventory of each hospital is available at
the distribution center.
• The first recourse action changes the quantities of planned deliveries. This is the
simplest recourse action that can be imagined. On planned delivery days, the
planned delivery quantity for a hospital is increased or decreased based on
product usage up to that day. Because the opportunities for adjusting the 2-week
plan are limited, these plans may still be expensive (even though the costs of the
recourse action are nihil).
• The second recourse action introduces out-and-back emergency deliveries to
hospitals that are likely to experience a shortage (based on the inventory at the
beginning of the day). Even though out-and-back emergency deliveries increase
the delivery flexibility, they do so at a high cost (out-and-back emergency
deliveries are assumed to be costly).
• The third recourse action introduces an emergency delivery route. More precisely,
there is a single emergency delivery route for each day visiting all hospitals that
are likely to run out of product on that day. Emergency deliveries come at a cost,
but the cost is not as high as with out-and-back emergency deliveries as the costs
are, in a sense, shared.
• The fourth recourse action introduces emergency deliveries into the regularly
planned delivery routes. The distribution center inserts emergency deliveries in
the planned delivery routes for that day. Emergency deliveries come at a cost, but
the cost is low as these deliveries are combined with regular deliveries.
There are various trade-offs that have to be considered when deciding on the most
appropriate recourse action. The recourse actions are presented in increasing order of
operational complexity. It is rather simple to adjust the quantities before the vehicles
leave the distribution center for their daily delivery routes. It is much more complicated
to introduce emergency deliveries into the planned daily delivery routes. The expected
delivery costs for the 2-week period vary depending on the sophistication of the recourse
action.
In the remainder of the paper, we examine if and how the solution approaches introduced
in Hemmelmayr et al. (in press) can be adapted to handle these recourse actions and
perform a computational study to see the impact on the 2-week delivery plans.
5. SOLUTION APPROACHES
5.1 Integer programming (IP) model
• What is Integer Programming?
An integer programming problem is a mathematical optimization or feasibility
program in which some or all of the variables are restricted to be integers. In many
settings the term refers to integer linear programming (ILP), in which the objective
function and the constraints (other than the integer constraints) are linear.
• What is the use of IP in this problem?
The blood bank wants to minimize delivery costs. Any delivery policy must ensure
that the customer does not have a product shortage, but at the same time damaged
product must be keep to a minimum but per clients (hospitals, clinics, medical
institutions) need the daily supply of blood preservatives with different quantity. So
IP is applied to make fixed route allow a significant number of routes to be
considered and thus can provide the right flexibility to significantly reduce costs
delivery and supplied enough products for customers.
• How to apply IP in this specific problem? (general view of the direction)
Provided the fixed routes for the areas, we use an integer programming model to
predict the real routes during the 14-day planning period. The integer programming
model optimally determines which hospitals to visit on any given day based on the
demand trends and capacity constraints at the individual hospitals, so that none of the
hospitals experience a stock-out, wastage is held to a minimum, and distribution costs
are reduced.
The entire routing of problems referred to as sequencing, scheduling, and routing are
inherently integer programs. For the routing component, the integer programming
model relies on short cutting a pre-determined fixed route in both, deterministic and
stochastic, cases. Experimentation has shown that this provides adequate flexibility
for constructing daily delivery routes.
• Specific notes:
There will be two sets of variables in the integer program: variables that represent
decisions related to the 2-week delivery plan that are similar to the R realizations, and
variables that represent recourse actions that are particular to each of the R
realizations. With the number of realizations in the sample, the size of the integer
program thus increases quickly. Consequently, a computationally viable alternative is
not likely to be offered by the integer programming method. Hence, in this project,
we will be using small sample sizes (R=10) to primarily run the model.
Under the assumption that the hospitals are indexed from 1 to n according to the order
in which they are visited on the fixed route, the formulation is:
The objective minimizes total travel distance during the planning period.
Constraints (1) ensure inventory balance from period to period.
Constraints (2) ensure that the inventory at the end of the planning period is greater or
equal to the inventory at the beginning of the planning period. Without such a constraint
no deliveries would be made towards the end of the planning period. Furthermore, we
consider our problem as a periodic problem which is repeated every T time units.
Constraints (3) ensure that inventory never exceeds the storage capacity.
Constraints (4) ensure that inventory does not spoil.
Constraints (5) state that the initial inventory is given.
Constraints (6) ensure that there are no product shortages.
Constraints (7) and (8) ensure that delivery quantities are nonnegative and that deliveries
can only be made when a hospital is visited.
Constraints (9) capture short cutting of the fixed route.
Constraints (10) limit route duration.
Constraints (11) state that the distribution center is visited every day.
• Code => explain the code

We have decided to use Cplex to run our formulations.
/*********************************************
* OPL 12.6.2.0 Model
* Author: Thao Huyen
* Creation Date: 25-12-2020 at 20:22:47
*********************************************/
//index
int numbHosp=...;
int numbDay=...;
range Center = 0 .. numbHosp + 1;
range Hosp = 1.. numbHosp;
range Time=1..numbDay;
range Timeplus=1..numbDay+1;
//Decision variable
dvar float+ d[Hosp][Time];
dvar boolean y[Center][Time];
dvar float+ I[Hosp][Timeplus];
dvar boolean X[Center][Center][Time];
//Parameter
float w[Center][Center]=...;
float s[Center]=...;
float U[Center][Timeplus]=...;
float C[Hosp]=...;
float D=...;
int k2=...;
float q[Hosp]=...;
execute PRE_SETUP{
cplex.epgap=0.1;
cplex.tilim=60*60
}
//Objective function
minimize sum(t in Time, i in Center, j in Center)w[i][j]*X[i][j][t];
//Constraints
subject to{
Constraint1:
forall(i in Hosp, t in Time){
I[i][t + 1] == I[i][t] - U[i][t] + d[i][t];
}
Constraint2:
forall(i in Hosp){
I[i][numbDay + 1] >= I[i][1];
}
Constraint3:
I[i][t]<=C[i];
}
Constraint4:
I[i][t] <= sum(s in t .. t + k2-1)U[i][s];
}
Constraint5:
forall(i in Hosp){
I[i][1]==q[i];
}
Constraint6:
forall(i in Hosp, t in Timeplus){
I[i][t]>=0;
}
Constraint7:
d[i][t]<=C[i]*y[i][t];
}
Constraint8:
d[i][t]>=0;
}
Constraint9:
forall(i in Center, j in Center, t in Time: i != numbHosp + 1 && j != 0 && i < j + 1){
X[i][j][t] >= y[i][t] + y[j][t] - 1 - sum(k in i + 1 .. j - 1)y[k][t];
}
Constraint10:
forall(t in Time){
sum(i in Center, j in Center)w[i][j]*X[i][j][t] + sum(i in Hosp)y[i][t]*s[i] <= D;
}
Constraint11:
forall( t in Time){
y[0][t] == 1;
y[numbHosp+1][t] == 1; //(11)
}
}
execute WRITE_RESULT{
var ofile=new IloOplOutputFile("Result_IPmodel.txt");
ofile.writeln("The objective function value: ",cplex.getObjValue());
for (var t in Time)for(var i in Center){
if(y[i][t]==1){
ofile.writeln("The inventory for all hospital at the beginning of day ");
ofile.writeln(" [",I,"] ")
}
}
ofile.writeln("------------------------------------------------------------------------");
ofile.close();
}
5.2 Recourse action
5.2.1 First recourse action – delivery quantity adjustment
The first recourse action changes the delivery quantities of
planned deliveries. This implies that there is a delivery quantity
for each realization r and therefore the variable representing the t
delivery quantity is changed to 𝒅𝒕𝒊𝒓 . Constraints (9)–(12) remain unchanged, but
constraints (1)–(8) are replaced by:
Constraint (13)-(20) adds r into formula to plan delivery quantity for a hospital is
increased or decreased based on product usage up on that day.
Note that constraints (16), which limit spoilage at hospitals, use the pre-computed
spoilage capacity Si.
1. File .mod
/*********************************************
* Creation Date: 05-12-2020 at 15:25:59
********************************************/
//index
int numbHosp=...;
int numbDay=...;
int numbRe=...;
int numbCenter=...;
range Hosp = 1 ..numbHosp; //5
range Center = 0 .. numbHosp + 1; //6
range Time = 1..numbDay; // 15
range Timeplus = 1..numbDay+1; //16
range Realiz = 1..numbRe; //5
range TempRange = 1..(numbRe*numbCenter); //34
float TempMatrix[TempRange][Timeplus] = ...;
float A[i in Realiz][j in Center][l in Timeplus] = TempMatrix[(i-
1)*(numbCenter)+j+1][l];
//Decision variable
dvar float+ dd[Hosp][Realiz][Timeplus];
dvar float IR[Hosp][Realiz][Timeplus];
//Parameter
float C[Hosp]=...;
float D=...;
float q[Hosp]=...;
float S[Hosp]=...;
dexpr float TC = sum(t in Time, i in Center, j in Center)w[i][j]*X[i][j][t];
minimize TC;
//Constraints
subject to{
forall(i in Realiz, j in Center, l in Timeplus){
A[i][j][l] == TempMatrix[(i-1)*(numbCenter)+j+1][l] ;
}
Constraint1:
forall(t in Time, i in Hosp, r in Realiz){
IR[i][r][t + 1] == IR[i][r][t] - A[i][r][t] + dd[i][r][t];
//(13)
}
Constraint2:
forall(i in Hosp, r in Realiz){
IR[i][r][numbDay + 1] >= IR[i][r][1];
//(14)
}
Constraint3:
forall(i in Hosp, t in Time, r in Realiz){
IR[i][r][t] <= C[i]; //(15)
}
Constraint4:
IR[i][r][t] <= S[i]; //(16)
}
Constraint5:
forall(i in Hosp,r in Realiz){
IR[i][r][1] == q[i]; //(17)
}
Constraint6:
forall(i in Hosp, t in Timeplus, r in Realiz){
IR[i][r][t] >= 0; //(18)
}
Constraint7:
dd[i][r][t] <= C[i]*y[r][t]; //(19)
}
Constraint8:
dd[i][r][t] >= 0; //(20)
}
Constraint9:
forall(i in Center, j in Center, t in Time: i != numbHosp + 1 &&
j != 0 && i < j + 1){
X[i][j][t] >= y[i][t] + y[j][t] - 1 - sum(k in i + 1 .. j -
1)y[k][t]; //9
}
Constraint10:
forall(t in Time){
sum(i in Center, j in Center)w[i][j]*X[i][j][t] + sum(i in
Hosp)y[i][t]*s[i] <= D; //10
}
Constraint11:
forall( t in Time){
y[0][t] == 1;
y[numbHosp+1][t] == 1; //(11)
}
}
var ofile=new IloOplOutputFile("Result_IPmodel_RA1.txt");
for (var t in Time)for(var i in Center)for(var j in Center){
if(y[i][t]==1,X[i][j][t]==1){
ofile.writeln("The quantity of blood in inventory at hospital i at the
beginning of the day t ");
ofile.writeln("[",dd,"]");
}
}
ofile.writeln("--------------------------------------------------------------
----------");
ofile.close();
}
2. File .dat
/*********************************************
* OPL 12.6.2.0 Data
* Creation Date: 05-12-2020 at 15:25:59
*********************************************/
SheetConnection MyData("IPmodel_data_RA.xlsx");
numbHosp from SheetRead(MyData,"numbHosp");
numbDay from SheetRead(MyData,"numbDay");
numbRe from SheetRead(MyData,"numbRe");
numbCenter from SheetRead(MyData,"numbCenter");
w from SheetRead(MyData,"Traveltime");
s from SheetRead(MyData,"Servicetime");
TempMatrix from SheetRead(MyData,"UsageR50");
C from SheetRead(MyData,"Capacity50");
D from SheetRead(MyData,"Maxroute");
S from SheetRead(MyData,"Maxspoilage");
q from SheetRead(MyData,"InitialInven50");
5.2.2 Second recourse action – out-and-back emergency deliveries
The second recourse action introduces out-and-back emergency deliveries to
hospitals that are about to experience a shortage. Therefore, for each realization
new variables need to be introduced to capture emergency deliveries. More
specifically, the delivery quantity 𝒅˜𝒕𝒊𝒓 , associated with an emergency delivery to
hospital i on day t in realization r, and the indicator 𝒚˜𝒕𝒊𝒓 , tracking whether or not
hospital i receives an emergency delivery in realization s on day t.
The objective function minimizes the planned delivery costs plus the expected
cost of emergency deliveries, which is approximated as the average cost of out-
and-back emergency deliveries, where we average over the realizations. Note that
the cost 𝑡ĩ of an out-and-back emergency delivery to hospital i is simply 𝑡0𝑖 + 𝑡𝑖0 .
Therefore, we have:
To cover emergency deliveries, i.e., the inventory balance restrictions have to be

expanded.
Constraint (21) meaning inventory balance from period to period due to the
changed of realization r to cover the emergency deliveries.
In addition, we must push the indicator variables 𝒚˜𝒕𝒊𝒓 to be 1 if an emergency

delivery is received by a hospital, i.e.,
Constraints (22) and (23) ensure that delivery quantities r are nonnegative and
that deliveries can only be made when a hospital is visited with emergency case.
Constraint (24) is 0-1 variable indicates if or not hospital i receives an emergency
delivery on day t and in realization r
Lastly, constraints (9)–(12), (14)–(19) and (20) are also neccessary.

1. File .mod
/*********************************************
* Creation Date: 05-12-2020 at 17:11:08
*********************************************/
//index
int numbHosp=...;
int numbDay=...;
int numbRe=...;
int numbCenter=...;
//Decision variable
dvar float+ dd[Hosp][Realiz][Time];
dvar float+ ddd[Hosp][Realiz][Time];
dvar boolean Y[Center][Realiz][Time];
dvar float+ IR[Hosp][Realiz][Timeplus];
//Parameter
float tt[Center]=...;
float C[Hosp]=...;
float D=...;
float q[Hosp]=...;
float S[Hosp]=...;
minimize sum(t in Time, i in Center ,j in
Center)w[i][j]*X[i][j][t]+1/numbRe*sum(r in Realiz, t in Time, i in
Center)Y[i][r][t]*tt[i];
//Constraints
subject to{
A[i][j][l] == TempMatrix[(i-1)*(numbCenter)+j+1][l] ;
}
Constraint1:
IR[i][r][t + 1] == IR[i][r][t] - A[i][r][t] +
dd[i][r][t] + ddd[i][r][t]; //(21)-(1)
}
Constraint2:
//(14)
}
Constraint3:
IR[i][r][t] <= C[i]; //(15)
}
Constraint4:
IR[i][r][t] <= S[i]; //(16)
}
Constraint5:
IR[i][r][1] == q[i]; //(17)
}
Constraint6:
IR[i][r][t] >= 0; //(18)
}
Constraint7:
dd[i][r][t] <= C[i]*y[r][t]; //(19)
}
Constraint8:
dd[i][r][t] >= 0; //(20)
}
Constraint9:
forall(i in Center, j in Center, t in Time: i != numbHosp +
1 && j != 0 && i < j + 1){
X[i][j][t] >= y[i][t] + y[j][t] - 1 - sum(k in i + 1
.. j - 1)y[k][t]; //9
}
Constraint10:
forall(t in Time){
sum(i in Center, j in Center)w[i][j]*X[i][j][t] +
sum(i in Hosp)y[i][t]*s[i] <= D; //10
}
Constraint11:
forall( t in Time){
y[0][t] == 1;
y[numbHosp+1][t] == 1; //(11)
}
Constraint12:
ddd[i][r][t] <= C[i] * Y[i][r][t]; //(22)
}
Constraint13:
ddd[i][r][t] >= 0; //(23)
}
}
for (var t in Time)for(var i in Center)for(var j in Center)for(var r in
Realiz){
if(y[i][t] == 1,X[i][j][t] == 1,Y[i][r][t] == 1){
ofile.writeln("The quantity of blood delivered to hospital i on day t
in realization r ");
ofile.writeln("[",IR,"]");
ofile.writeln("The quantity of blood delivered by an emergency delivery
to hospital i on day t in realization r ");
ofile.writeln("[",ddd,"]")
}
}
ofile.writeln("--------------------------------------------------------------
----------");
ofile.close();
}
2. File .dat
/*********************************************
* OPL 12.6.2.0 Data
* Creation Date: 05-12-2020 at 17:11:08
*********************************************/
SheetConnection MyData("IPmodel_data_RA2.xlsx");
tt from SheetRead(MyData,"tt");
TempMatrix from SheetRead(MyData,"UsageR");
C from SheetRead(MyData,"Capacity");
q from SheetRead(MyData,"InitialInven");
5.2.3 Third recourse action
An emergency delivery is implemented by the third recourse action. A single

emergency delivery path that visits all hospitals that are about to run out of products
on a specific day. As new variables for each realization with the second recourse
intervention To catch emergency deliveries, they are launched.
However, it is no longer sufficient to realize that an emergency delivery (𝒚˜𝒕𝒊𝒓) is

received by a hospital i on day t in realization r plus the associated quantity of
delivery(𝒅˜𝒕𝒊𝒓 ). As well as how it affects the costs, the emergency distribution path
needs to be determined. We are therefore implementing. Variables ext, which
indicate whether hospital j is visited after 𝒙˜𝒕𝒊𝒋𝒓 directly. In the emergency route of
day t for realization r, hospital i.
The target function minimizes the cost of delivery and the estimated cost of
emergency delivery roughly as well as the average cost of the delivery routes where
we average the deliveries, i.e.
Constraints (25) capture short cutting of the fixed emergency route
Constraints (26) state that the distribution center is visited every day and state that
the depot is included in every emergency route.
Constraints (27) limit route duration (tour length for emergency routes)
Constraint (28): 0–1 variable indicating whether or not the delivery vehicle travels
from hospital i to hospital j on day t in realization r (where 0 and n þ 1 denote the
Red Cross distribution center)
1. File .mod
/*********************************************
* Creation Date: 05-12-2020 at 21:44:23
*********************************************/
//index
int numbHosp=...;
int numbDay=...;
int numbRe=...;
int numbCenter=...;
//Decision variable
dvar boolean x[Center][Center][Realiz][Time];
//Parameter
float C[Hosp]=...;
float D=...;
float q[Hosp]=...;
float S[Hosp]=...;
minimize sum(t in Time, i in Center, j in
Center)w[i][j]*X[i][j][t]+(1/numbRe)*sum(r in Realiz, t in Time, i in Center,
j in Center)w[i][j]*x[i][j][r][t];
//Constraints
subject to{
A[i][j][l] == TempMatrix[(i-1)*(numbCenter)+j+1][l]
;
}
Constraint1:
IR[i][r][t + 1] == IR[i][r][t] - A[i][r][t] +
dd[i][r][t] + ddd[i][r][t]; //(21)-(1)
}
Constraint2:
//(14)
}
Constraint3:
IR[i][r][t] <= C[i]; //(15)
}
Constraint4:
IR[i][r][t] <= S[i]; //(16)
}
Constraint5:
IR[i][r][1] == q[i]; //(17)
}
Constraint6:
IR[i][r][t] >= 0; //(18)
}
Constraint7:
dd[i][r][t] <= C[i]*y[r][t]; //(19)
}
Constraint8:
dd[i][r][t] >= 0; //(20)
}
Constraint9:
1 && j != 0 && i < j + 1){
.. j - 1)y[k][t]; //9
}
Constraint10:
forall(t in Time){
sum(i in Center)y[i][t]*s[i] <= D; //10
}
Constraint11:
forall( t in Time){
y[0][t] == 1;
y[numbHosp+1][t] == 1; //(11)
}
Constraint12:
ddd[i][r][t] <= C[i] * Y[i][r][t]; //(22)
}
Constraint13:
ddd[i][r][t] >= 0; //(23)
}
//RA-additional constraints
Constraint14:
forall(i in Center, j in Center, t in Time, r in Realiz){
x[i][j][r][t] >= Y[i][r][t] + Y[i][r][t] - 1 -
sum(k in i+1..j-1)Y[k][r][t]; //(25)
}
Constraint15:
forall(t in Time, r in Realiz){
Y[0][r][t] == Y[numbHosp+1][r][t] == 1;
//(26)
}
Constraint16:
sum(i in Center, j in Center)w[i][j]*x[i][j][r][t]
+ sum(i in Hosp)Y[i][r][t]*s[i] <= D; //(27)
}
}
Realiz){
if(y[i][t] == 1,X[i][j][t] == 1,Y[i][r][t] == 1,x[i][j][r][t]==1){
}
}
2. File .dat
/*********************************************
* OPL 12.6.2.0 Data
* Creation Date: 05-12-2020 at 21:44:23
*********************************************/
5.2.4 Fourth recourse action
Emergency deliveries are integrated into the regularly scheduled supply routes by
the fourth recourse intervention. The optimization problem minimizes the average
estimated routing cost for all realizations, i.e.,
In order to model shortcuts, we need to understand regular visits and emergency

visits at the same time. When Hospital i and Hospital j receive either an usual or
an emergency delivery and none of the hospitals in between receive a regular or
emergency delivery, i.e. Hospital j will be visited directly after hospital i on day t.
Constraint 29 ensures regular visits and emergency visits at the same time.
Constrain 30 ensuresthe hospital does not receive a periodic delivery and an
emergency delivery on a particular day in a specific realization.
Constrain 31 ensures our computational experiments we have imposed a lmit on
the tour length.
In the end, constraints (9)-(12),(14)-(24) and(28) are also necessary. Note that
emergency deliveries are no more expensive than regular deliveries due to our
modeling options, i.e. the short cut of a fixed route, which reduces the challenge
of the simple strategy.
1. File .mod
/*********************************************
* Creation Date: 06-12-2020 at 10:04:04
*********************************************/
//index
int numbHosp=...;
int numbDay=...;
int numbRe=...;
int numbCenter=...;
//Decision variables
dvar boolean x[Center][Center][Realiz][Time];
//Parameter
float C[Hosp]=...;
float D=...;
float q[Hosp]=...;
float S[Hosp]=...;
minimize (1/numbRe)*sum(r in Realiz, t in Time, i in Center, j in
Center)w[i][j]*x[i][j][r][t];
//Constraints
subject to{
A[i][j][l] == TempMatrix[(i-1)*(numbCenter)+j+1][l]
;
}
Constraint1:
IR[i][r][t + 1] == IR[i][r][t] - A[i][r][t] +
dd[i][r][t] + ddd[i][r][t]; //(21)-(1)
}
Constraint2:
//(14)
}
Constraint3:
IR[i][r][t] <= C[i]; //(15)
}
Constraint4:
IR[i][r][t] <= S[i]; //(16)
}
Constraint5:
IR[i][r][1] == q[i]; //(17)
}
Constraint6:
IR[i][r][t] >= 0; //(18)
}
Constraint7:
dd[i][r][t] <= C[i]*y[r][t]; //(19)
}
Constraint8:
dd[i][r][t] >= 0; //(20)
}
Constraint9:
1 && j != 0 && i < j + 1){
.. j - 1)y[k][t]; //9
}
Constraint10:
forall(t in Time){
sum(i in Center)y[i][t]*s[i] <= D; //10
}
Constraint11:
forall( t in Time){
y[0][t] == 1;
y[numbHosp+1][t] == 1; //(11)
}
Constraint12:
ddd[i][r][t] <= C[i] * Y[i][r][t]; //(22)
}
Constraint13:
ddd[i][r][t] >= 0; //(23)
}
//RA-additional constraints
Constraint14:
forall(i in Center, j in Center, t in Time, r in Realiz){
x[i][j][r][t] >= (Y[i][r][t]+y[i][t]) +
(Y[j][r][t]+y[j][t]) - 1 - sum(k in i+1..j-1)(Y[k][r][t] + y[k][t]);
//(29)
}
Constraint15:
forall(i in Center, t in Time, r in Realiz){
Y[i][r][t] + y[i][t] <= 1; //(30)
}
Constraint16:
sum(i in Center, j in Center)w[i][j]*x[i][j][r][t]
+ sum(i in Hosp)(y[i][t] + Y[i][r][t])*s[i] <= D;
//(31)
}
}
Realiz){
if(y[i][t] == 1,X[i][j][t] == 1,Y[i][r][t] == 1,x[i][j][r][t]==1){
}
}
ofile.writeln("--------------------------------------------------------------
----------");
ofile.close();
}
2. File .dat
/*********************************************
* OPL 12.6.2.0 Data
* Creation Date: 06-12-2020 at 10:04:04
*********************************************/
6. IMPLENTATION AND TEST (IP)
6.1 Computational Study
The IP algorithm was implemented in Cplex Studio version 12.1.0. The integer programs
were solved on a 3.2 GHz Pentium 4 processor running the Windows 10 operating
system and using Cplex Optimizer Studio 12.1.0.
Furthermore, we consider three different levels of storage capacity at the hospitals:
specifically, 50%, 75% and 100% of the actual storage capacity. Finally, a spoilage
period of 2 days which we chose to run the model sufficiently
To evaluate a 2-week plan, we perform a simple simulation. A product usage realization
for the 2-week period is generated for each hospital using the appropriate distribution.
The 2-week plan is then used to supply product to the hospitals performing recourse
actions as needed. This process is repeated around 20 times. The following statistics are
collected for the 2-week period on Internet: average emergency delivery costs (and thus
average total costs), average number of hospital visits per day, and average number of
emergency hospital. When evaluating a 2-week plan using recourse action 1, stock-outs
may occur so in that setting we also keep track of the number of stock-outs.
The sample size has a dramatic effect on the size of the integer programs that need to be
solved. It has been clear from the start that only relatively small sample sizes can be used
with the integer programming approach; in the order 15. On the other hand, for the last
two recourse actions, the expected emergency delivery costs incurred for a hospital for a
particular visit-day combination depend on the visit-day combinations of the other
hospitals and have to be computed from scratch after every change in a visit-day
combination (regardless of the hospital for which the change occurs). This balances the
need to do a large number of iterations and the need to have a reasonable sample size
when final decisions are being made. In our implementation we start with a sample size
of 15 during the course of the algorithm.
The average run time for the IP using a sample size of 15 is 2 minutes, for recourse action
1 is 3.43s, for recourse action 2 it is 3.17s, for recourse action 3 it is 5.22s, and for
recourse action 4 is 25.36s.
6.2 Algorithm Explanation

6.2.1 Integer Programming
To mimic the current situation, we have implemented a basic model that is driven by
product usage at the hospitals. Each day, those hospitals that need to receive a
delivery on that day, because they would otherwise experience a stock-out the next
day, will be visited. The delivery routes for a day are determined using a vehicle
routing algorithm.
At the heart of our integer programming model is the observation of product usage
and a fixed route starting and ending the distribution center and visiting 5 hospitals in
15 days. In order to handle product spoilage, the storage capacity at hospital is
adjusted based on hospital’s usage and the product spoilage period.
Number of Hospital 5
Number of day 15
Maximum route duration (hour) 50
Length of spoilage period 2
Product
i/t
Usage 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
1 224 659 876 681 506 202 602 922 329 495 346 862 162 613 385 536
2 270 985 957 395 132 522 322 749 554 777 908 873 637 639 687 536
3 103 252 485 613 229 995 633 696 386 411 255 223 384 772 945 361
4 798 110 471 132 156 592 878 127 318 611 322 265 987 593 888 864
5 866 521 396 518 551 441 770 167 814 445 236 920 662 450 973 296
6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Table 1. Product usage of hospital i on day t
However, the hospitals are not served every day and the hospitals are not always
served together, i.e., the delivery route may differ from day to day.
Denote hospital i is immediately followed by hospital j in a route (as the distribution

center is on any route). Let the travel time between two locations i and j be denoted
by tij.
Travel time between i and j (hour) i/j 0 1 2 3 4 5 6
0 0112211
1 2012111
2 1102312
3 1120221
4 1221023
5 1122201
6 1213210
Table 2. Travel time between hospital i and hospital j
We determine delivery routes for a period of 15 days, the objective is to minimize
total travel distance during the planning period.
Storage capacity 100% 50% 75%

1 10000 5000 7500
2 15000 7500 11250
3 20000 10000 15000
4 14000 7000 10500
5 17000 8500 12750
Initial Inventory
1 5000
2 7500
3 10000
4 7000
5 8500
Table 3. Storage capacity at each rate and Initial inventory of each hospital
The integer program was solved by using CPLEX.
Figure 1. Inventory
We assume that the safety stock policy at every hospital is to ensure that at least ti
days of inventory is available at the beginning of the day, that blood product spoil in
2 days, and that the inventory at every hospital at the end of the planning period has
to be at least as large as the initial inventory at the beginning of the planning period.
From the experiment, we can see that the initial and final inventory at the hospitals
are equal of half or less than the storage capacity.
Initial Final 100% 75% 50%
Inventory Inventory Capacity Capacity Capacity
1 5000 1 441 330.75
2 7500 2 0 495.75 330.5
3 10000 3 498 373.5 249
4 7000 4 557 417.75 278.5
5 8500 5 441 330.75 220.5
Table 4. Final inventory of each capacity of each hospital
Figure 2. Quantity
Due to the difference in daily usage, the number of deliveries required to serve a
hospital during the planning period differs. When we allow the use of entire storage
capacity at a hospital and we assume a spoilage period of 2 days, the number of
deliveries during the planning period range from 1 to 6.
With the short spoilage period, the integer programming gives us the quantity of the
delivery schedules as above:
- The first 15 columns present for number of days during planning period
- The last column presents for the solution of the objective function
- 5 rows present for the quantity of blood the hospitals receive each day
( It is equal to 0 when there is no delivery on that day)
Furthermore, we have also considered three different levels of storage capacity at the
hospitals; specially 50%, 75% and 100% of the actual storage capacity as key
problem parameter to assess the sensitivity.
The results have shown that the case for 75% storage capacity can be used for blood
products when it gives the best solution time (the smallest one) of the integer
program.
6.2.2 Recourse Actions
Objective function value
Capacity RA1 RA2 RA3 RA4
50 99 1617 303 434
70 150 1775 315 479
100 195 1838.2 319.8 496
Table 5. Comparing 4 recourse actions to each other for each capacity based on
objective function value
In general:
- We did both with the size of R is 5 (r=1…5)
- We did both times 2 weeks ( especially 15 days)
- The more capacity the hospitals have, the more objective function value they
have
- RA 1 got the least Objective function value and RA 2 got the most Objective
function value
- The differences get larger when the capacity is tighter (Because emergency
delivery costs are likely to play a bigger role in the total cost )
- The difference of RA2 among these 3 RAs is significant.(Because it has the
planned delivery costs plus s the out-and-back emergency delivery cost which
is very expensive)
In details:
RA1 RA2 RA3 RA4
Main idea changes the Capturing Applying Applying
delivery emergency emergency emergency
quantities of deliveries in delivery route, deliveries into
planned order to which is a single the regularly
deliveries experience a emergency planned
following the shortage delivery route delivery routes.
changing of R visiting all
hospitals that are
about to run out
of product on a
particular day.
Total cost Total cost of Changed Changed slightly Changed
of capacity capacity 100 is slightly slightly
levels twice as much
as that of 50
influence No. Because it the most less expensive less expensive
of the doesn’t use expensive (emergency (emergency
recourse emergency (emergency deliveries to deliveries to
actions deliveries to hospitals are hospitals are
hospitals are coordinated) coordinated)
handled
independently)
Risks Less More More

Table 6. Detailed comparison between recourse actions
Objective function value
Capacity IP RA1 RA2 RA3 RA4
50 87 99 1617 303 434
70 84 150 1775 315 479
100 85 195 1838.2 319.8 496
Table 7. Comparing IP with 4 Recourse Actions
IP RAs
R (Realization) Not use +We did with
the size of R is 5
(r=1…5
Capacity levels Fluctuates total Increase total

cost following 3 cost following
levels. capacity level
respectively
Time 15 days 15 days
Emergency No RA2, RA3, RA4
Table 8. Comparison between recourse actions and IP
All in all, the IP works fine at low capacity levels, but tends to significantly
underestimate the cost of emergency delivery for higher capacity levels. It is also clear
that a higher percentage of the overall costs for low levels of capacity are attributed to
emergency delivery costs. The lower the storage space in hospitals, the more
expensive it would be to ensure the supply of goods using only regular deliveries.
Many deliveries would happen to protect against unforeseen high consumption of the
commodity. On the other hand, it is possible to be risky to have emergency deliveries
despite its high cost. In most cases, the cost-effective base policy will be used, but if
product usage happens to be considerably greater than usual, a more costly alternative
for emergency distribution is required to accommodate it. We also observe the effect
of the actions of the solution on themselves. Recourse response 2 is the most costly,
because hospital emergency deliveries are treated separately, while recourse actions 3
and 4 are less costly, because hospital emergency deliveries are organized. As a result,
with recourse actions 3 and 4, more " risks " are taken, and a greater part of the gross
delivery costs are attributed to the cost of emergency delivery. It also appears like the
strategies created by the IP are more traditional, in the sense that the cost of
emergency supply is responsible for a lower portion of the overall delivery costs.
RA2 RA3 RA4

100 7.12 7.01 7.32
75 5.65 5.45 5.78
50 4.32 4.1 4.41
Avg. 5.71 5.52 5.84
Table 9. Average number of regular hospital visits per day
RA2 RA3 RA4

100 0.4 0.47 0.5
75 0.25 0.3 0.41
50 0.1 0.27 0.39
Avg. 0.25 0.35 0.43
Table 10. Average number of emergency hospital visits per day
We determine more detailed statistics regards to the actual deliveries. Table show the
average number of regular (i.e., planned) hospital visits per day and the average
number of emergency hospital visits per day for IP for each hospital capacity for each
recourse action.
It can be seen that the when the recourse action is more involved and cost-effective,
more emergency deliveries are performed whereas fewer regular emergencies are
being carried out. This is statistically clearer the lower the capacity level of the
hospital is. It is understandable given the fact that the less capacity, the more
challenging it is to guarantee product availability, hence the increase in emergency
deliveries. Additionally, if the cost of emergency deliveries are considered cost-
efficient, they would like to use even more.
7. CONCLUSION
To sum up, this was formulation to plan delivery routes for the supply of blood products
to hospitals by a blood bank. This formula is sampling-based and allows specifically for
the inconsistency of the use of blood products in hospitals. A number of emergency
delivery solutions are introduced to control delivery costs while guaranteeing product
supply at the hospital. We have run a computational study in order to analyze how
efficient the model is as well as the influence of stochastic product usage upon delivery
planning.
The idea of it has been carried out, proving an efficient and beneficial way of adding
recourse actions to stochastic demand of blood to hospitals. It definitely helps responding
to demand in a cost-effective way and being able to compare between methods of adding
emergency deliveries. Moreover, since this is all automation, it will help a lot with the
planning of stochastic goods in time, accuracy, and cost.
8. REFERENCE
Vera Hemmelmayr , Karl F. Doerner , Richard F. Hartl , Martin W.P. Savelsbergh ( 9

June 2019), Vendor managed inventory for environments with stochastic product usage.
Retrieved from https://www.elsevier.com/en-xs/search-
results?query=Vendor+managed+inventory+for+environments+with+stochastic+product
+usage
Vera Hemmelmayr , Karl F. Doerner , Richard F. Hartl , Martin W.P. Savelsbergh (13
March 2018), Delivery strategies for blood products supplies. Retrieved from
https://www.researchgate.net/profile/Martin_Savelsbergh/publication/227068423_Delive
ry_strategies_for_blood_products_supplies/links/02e7e52a575f08a41d000000/Delivery-
strategies-for-blood-products-supplies.pdf
Integer Programming, (12 December 2020). In Wikipedia. Retrieved from

https://en.wikipedia.org/wiki/Integer_programming

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INTERNATIONAL UNIVERSITY

VIETNAM NATIONAL UNIVERSITY HCMC (IU-VNU)

Group 11 – Thursday Morning

Date: Dec 27th , 2020

6. IMPLENTATION AND TEST (IP) .............................................................................. 25

3. BACKGROUND (Materials used and relevant literature)

More importantly, when usage is stochastic it becomes prohibitive or maybe even

• Code => explain the code

To cover emergency deliveries, i.e., the inventory balance restrictions have to be

In addition, we must push the indicator variables 𝒚˜𝒕𝒊𝒓 to be 1 if an emergency

Lastly, constraints (9)–(12), (14)–(19) and (20) are also neccessary.

An emergency delivery is implemented by the third recourse action. A single

However, it is no longer sufficient to realize that an emergency delivery (𝒚˜𝒕𝒊𝒓) is

Constraints (25) capture short cutting of the fixed emergency route

In order to model shortcuts, we need to understand regular visits and emergency

6.2 Algorithm Explanation

Denote hospital i is immediately followed by hospital j in a route (as the distribution

Storage capacity 100% 50% 75%

The integer program was solved by using CPLEX.

Objective function value

Capacity RA1 RA2 RA3 RA4

50 99 1617 303 434

70 150 1775 315 479

100 195 1838.2 319.8 496

Risks Less More More

Objective function value

Capacity IP RA1 RA2 RA3 RA4

50 87 99 1617 303 434

70 84 150 1775 315 479

100 85 195 1838.2 319.8 496

Table 7. Comparing IP with 4 Recourse Actions

Capacity levels Fluctuates total Increase total

RA2 RA3 RA4

RA2 RA3 RA4

Vera Hemmelmayr , Karl F. Doerner , Richard F. Hartl , Martin W.P. Savelsbergh ( 9

Integer Programming, (12 December 2020). In Wikipedia. Retrieved from

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