Annals of Operations Research 134, 153–181, 2005 c 2005 Springer Science + Business Media, Inc. Manufactured in The Netherlands. Solving the Vehicle Routing Problem with Stochastic Demands using the Cross-Entropy Method KRISHNA CHEPURI
[email protected] Decision Analysis & Portfolio Management, J&J PRD, Titusvile, NJ 08560 TITO HOMEM-DE-MELLO ∗
[email protected] Department of Industrial Engineering and Management Sciences, Northwestern University, Evanston, IL 60208 Received January 2003; Revised August 2003; Accepted January 2004 Abstract. An alternate formulation of the classical vehicle routing problem with stochastic demands (VRPSD)isconsidered. We propose a new heuristic method to solve the problem, based on the Cross-Entropy method. In order to better estimate the objective function at each point in the domain, we incorporate Monte Carlo sampling. This creates many practical issues, especially the decision as to when to draw new samples and how many samples to use. We also develop a framework for obtaining exact solutions and tight lower bounds for the problem under various conditions, which include specific families of demand distributions. This is used to assess the performance of the algorithm. Finally, numerical results are presented for various problem instances to illustrate the ideas. Keywords: vehicle routing problem, stochastic optimization, cross-entropy method 1. Stochastic vehicle routing The classical vehicle routing problem (VRP)isdefined on a graph G = (V, A), where V ={v0,v1,...,vn} is a set of vertices and A ={(vi ,vj ): i, j ∈{0,...,n},vi ,vj ∈ V } is the arc set. A matrix L = (Li, j ) can be defined on A, where the coefficient Li, j defines the distance between nodes vi and v j and is proportional to the cost of travelling the corresponding arc.