Dissertation Title:  Optimizing Logistics Costs in the Hydrocarbon Industry – Inventory Location and Routing Models

Author: Megi ÇALI

• Institution: University of Tirana,  Faculty of Economics, Department of Management

• Field of study:  Information Systems Economy

• Publication date: 11.06.2026

• The dissertation is published in Albanian.

© Copyright: Maggie CHALI

Published by the University of Tirana
Based on legal acts, regulations and policies of the UT

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abstract

This paper focuses on the optimization of logistics in hydrocarbon companies in Albania, focusing on two essential dimensions of logistics problems, the identification of distribution centers and inventory routing. Through p-median, distribution centers that optimize transportation costs are identified. The paper goes into a further perspective of cost optimization, the inventory routing problem that optimizes transportation costs from distribution centers to points of sale for end customers, focusing on changing the inventory management approach from RMI to VMI. For the implementation of the p-median model, quantitative data on demand and distances were collected for two of the companies operating in the market for a period of one year, while for the implementation of the IRP model, quantitative data were collected for a period of one year, on demand, fleets, storage capacities and vehicle fleet, stock in warehouses for each day, as well as storage and transportation costs, for a company operating in the market. The research results show that transportation costs are optimized with the opening of a second distribution center and the model selects the two best centers in terms of hydrocarbon distribution. At the same time, the change in approach from RMI to VMI, and the implemented IRP model, significantly reduces the inventory routing costs for the company. In this model, in addition to costs, the use of vehicles and inventory storage are optimized. The results show that there are significant differences in terms of costs, based on the policies of transportation by one vehicle or visits by more than one vehicle to a sales unit. The study has important implications in theoretical and applied terms, focusing on the spheres of policy-making and company decision-making. These implications are discussed in the last chapter of this paper along with its limitations and the scope for further research in this area.

Field: Operations Management

Keywords: Transportation cost optimization, supply chain management, optimization models, vendor and retailer managed inventory, hydrocarbon industry

 

Abstract

This study focuses on the optimization of logistics in hydrocarbon companies in Albania, concentrating on two essential dimensions of logistics problems: the identification of distribution centers and inventory routing. Using the p-median approach, distribution centers that optimize transportation costs are identified. The study further explores cost optimization in the Inventory Routing Problem (IRP), which minimizes transportation costs from the distribution centers to the sales points for end customers, focusing on the shift in inventory management approach from RMI (Retailer-Managed Inventory) to VMI (Vendor-Managed Inventory). For the implementation of the p-median model, quantitative data on demand and distances were collected for two companies operating in the market over a one-year period. For the IRP model, quantitative data were gathered over one year, including demand, routes, storage capacities, fleet information, daily inventory levels, as well as holding and transportation costs for a company operating in the market. The research results show that transportation costs are optimized by opening a second distribution center, and the model selects the two best centers for hydrocarbon distribution. Simultaneously, the shift from RMI to VMI, together with the implemented IRP model, significantly reduces inventory routing costs for the company. In this model, in addition to cost, vehicle utilization and inventory holding are also optimized. The results indicate significant differences in terms of costs based on transportation policies, whether a single vehicle or multiple vehicles visit a sales unit. The study has important theoretical and practical implications, focusing on decision-making for both policymakers and companies. These implications, along with the study's limitations and avenues for future research, are discussed in the final chapter of this work. Field of study: Operation Management

Keywords: Transportation cost optimization, supply chain management, optimization models, country-managed inventory, retailer-managed inventory, hydrocarbon industry.