Inventory and transportation sharing in retail supply chains

In grocery retail supply chains, a single retailer with a large market share is delivered by many suppliers. For replenishment decisions the retailer (or the supplier in case of Vendor Managed Inventory) has to make a tradeoff between keeping more inventory or using a higher replenishment frequency. In models studying this tradeoff inventory and transportation capacities are often fixed and costs are modeled linear. However, when looking from the retailer´s large network, opportunities for both transport and inventory sharing capacity arise, indicating that fixed capacity constraints or fixed costs are not fully realistic. In this study we simulate the impact of sharing transport and inventory capacity in a dynamic situation and show how they can be used to reduce costs and improve supply chain performance.