Hybrid algorithm for a vendor managed inventory system in a two-echelon supply chain

In this paper we address the issue of vendor managed inventory (VMI) by considering a two-echelon single vendor/multiple buyer supply chain network. We try to find the optimal sales quantity by maximizing profit, given as a nonlinear and non-convex objective function. For such complicated combinatorial optimization problems, exact algorithms and optimization commercial software such as LINGO are inefficient, especially on practical-size problems. In this paper we develop a hybrid genetic/simulated annealing algorithm to deal with this nonlinear problem. Our results demonstrate that the proposed hybrid algorithm outperforms previous methodologies and achieves more robust solutions.