Distribution management by means of cutoff order size: a case study

We present a case study on physical distribution management for a production company in Western Europe. The company delivers finished goods both from distribution centres and directly from plants to its customers. The lead time from distribution centres is shorter, but higher costs are involved. The choice for delivery of an individual order is based on the so-called stockmix and cutoff order size. The stockmix is the set of products stocked at the distribution centre, which for efficiency reasons is restricted. Orders smaller than the cutoff order size are delivered from the distribution centre closest to the customer, provided that the product ordered is present in its stockmix. Otherwise they are delivered from the production plant that makes the product. In this paper we develop methods to determine both the stockmix and the cutoff order size for each distribution centre. The objective considered is the minimisation of distribution and handling costs subject to service constraints.     

时变需求等量进货情形下集成供应链生产订货策略研究

构建了一个包含原料采购、生产和销售过程的集成供应链模型,研究了由原料、生产商和销售商产品构成的三层库存系统的生产订货问题。在有限的规划期内,销售商每次进货量相同,生产商按照EOQ模型采购原材料。以最小化供应链系统的总运营成本为目标,构建一个混合整数非线性规划模型,寻找销售商最优订货方案和生产商最佳生产策略。首先利用网络优化方法求解生产商的最优生产计划,其次利用定界穷举法寻求销售商最优的订货周期,给出了具体的计算方法和Matlab程序。通过算例分析验证了算法的有效性,并研究了各参数对最小费用及最优解的影响。     

Integrated production scheduling and distribution planning in dairy supply chain by hybrid modelling

In this paper we address the production scheduling and distribution planning problem in a yoghurt production line of the multi-product dairy plants. A mixed integer linear programming model is developed for the considered problem. The objective function aims to maximize the benefit by considering the shelf life dependent pricing component and costs such as processing, setup, storage, overtime, backlogging, and transportation costs. Key features of the model include sequence dependent setup times, minimum and maximum lot sizes, overtime, shelf life requirements, machine speeds, dedicated production lines, typically arising in the dairy industry. The model obtains the optimal production plan for each product type, on each production line, in each period together with the delivery plan. The hybrid modelling approach is adopted to explore the dynamic behavior of the real world system. In the hybrid approach, operation time is considered as a dynamic factor and it is adjusted by the results of the simulation and optimization model iteratively. Thus, more realistic solutions are obtained for the scheduling problem in yoghurt industry by using the iterative hybrid optimization-simulation procedure. The efficiency and applicability of the proposed model and approach are demonstrated in a case study for a leading dairy manufacturing company in Turkey.     

Integrated Production and Distribution Planning for Södra Cell AB

In this paper we consider integrated planning of transportation of raw material, production and distribution of products of the supply chain at Södra Cell AB, a major European pulp mill company. The strategic planning period is one year. Decisions included in the planning are transportation of raw materials from harvest areas to pulp mills, production mix and contents at pulp mills, distribution of pulp products from mills to customer via terminals or directly and selection of potential orders and their levels at customers. Distribution is carried out by three different transportation modes; vessels, trains and trucks. We propose a mathematical model for the entire supply chain which includes a large number of continuous variables and a set of binary variables to reflect decisions about product mix and order selection at customers. Five different alternatives regarding production mix in a case study carried out at Södra Cell are analyzed and evaluated. Each alternative describes which products will be produced at which pulp mills.     

Structuring production planning systems for computer applications

Activities in a job shop type mechanical company can be split in production, product cycle and production cycle. The corresponding flow in each of these are materials, manufacturing specifications and product requirements. Production planning will plan and control these flows. Basic data structures are a product model and a corresponding hierarchy linked to production resources. A planning system may be designed by combining a set of operation or building blocks. These are three types: user communication, data base management and basic operations. The basic operations cover all processing necessary in production planning and represent the fundamental building blocks. A list of basic operations is suggested.     

一家跨国公司生产分配规划问题的研究

基于香港一家时装制造公司的实际背景,对有关生产分配规划的问题进行了研究,建立了一个多目标规划模型,运用了禁忌搜索算法求解此模型,仿真结果显示出算法的有效性。     

A stochastic programming approach for multi-site aggregate production planning

Production planning problems play a vital role in the supply chain management area, by which decision makers can determine the production loading plan—consisting of the quantity of production and the workforce level at each production plant—to fulfil market demand. This paper addresses the production planning problem with additional constraints, such as production plant preference selection. To deal with the uncertain demand data, a stochastic programming approach is proposed to determine optimal medium-term production loading plans under an uncertain environment. A set of data from a multinational lingerie company in Hong Kong is used to demonstrate the robustness and effectiveness of the proposed model. An analysis of the probability distribution of economic demand assumptions is performed. The impact of unit shortage costs on the total cost is also analysed.     

Optimal production plans and shipment schedules in a supply-chain system with multiple suppliers and multiple buyers

This research addresses an optimal policy for production and procurement in a supply-chain system with multiple non-competing suppliers, a manufacturer and multiple non-identical buyers. The manufacturer procures raw materials from suppliers, converts them to finished products and ships the products to each buyer at a fixed-interval of time over a finite planning horizon. The demand of finished product is given by buyers and the shipment size to each buyer is fixed. The problem is to determine the production start time, the initial and ending inventory, the cycle beginning and ending time, the number of orders of raw materials in each cycle, and the number of cycles for a finite planning horizon so as to minimize the system cost. A surrogate network representation of the problem developed to obtain an efficient, optimal solution to determine the production cycle and cycle costs with predetermined shipment schedules in the planning horizon. This research prescribes optimal policies for a multi-stage production and procurements for all shipments scheduled over the planning horizon. Numerical examples are also provided to illustrate the system.     

Fuzzy chance-constrained programming model for a multi-echelon reverse logistics network for household appliances

Efficient planning and design of an appropriate reverse logistics network is crucial to the economical collection and disposal of scrapped household appliances and electrical products. Such systems are commonly modelled as mixed-integer programs, whose solutions will determine the location of individual facilities that optimize material flow. One of the major drawbacks of current models is that they do not adequately address the important issue of uncertainty in demand and supply. Another deficiency in current models is that they are restricted to a two-echelon system. This study addresses these deficiencies by embodying such uncertainties in the model using the technique of fuzzy-chance constrained programming, and by extending the model to a three-echelon system. A heuristic in the form of a hybrid genetic algorithm is then employed to generate low-cost solutions. The overall objective is to find economical solutions to the general problem of determining the volume of appliances to be moved between the three echelons of customer base to collection sites, collection sites to disposal centres and disposal centre to landfill centre/remanufacturing centre; and to the problems of positioning the disposal centres and the landfill centre/remanufacturing centres within the problem domain. A case example in China is presented and the quality and robustness of the solutions are explored through sensitivity analysis.     

An exact algorithm for a cross-docking supply chain network design problem

This paper proposes a branch-and-price algorithm as an exact algorithm for the cross-docking supply chain network design problem introduced by one of the authors of this paper. The objective is to optimally locate cross-docking (CD) centres and allocate vehicles for direct transportation services from the associated origin node to the associated CD centre or from the associated CD centre to the associated destination node so as to satisfy a given set of freight demands at minimum cost subject to the associated service (delivery) time restriction. A set-partitioning-based formulation is derived for the problem for which some solution properties are characterized. Based on the properties, a branch-and-price algorithm is derived. The properties can also be used in deriving any efficient local search heuristics with the move operation (neighbourhood search operation) of modifying assignment of some freight demands from current CD centres to other CD centres. Computational experiments show that the branch-and-price algorithm is effective and efficient and also that the solution properties contribute to improve the efficiency of the local search heuristics.     

A multiple period capacitated inventory model for airline fuel management: a case study

One of the major operating cost items of an airline company is fuel, which can amount to approximately 20% of its overall operating cost. This paper presents a decision support model that determines the amount of fuel to be uplifted by a plane at each station along its route over a predetermined planning horizon so as to minimise overall fuel costs. The aforementioned fuel management problem is modelled as a multiple period capacitated inventory problem and solved using linear programming. An example application illustrates the applicability of this model to Middle East Airline's (MEA) operations and summarises the dollar savings obtained by applying it over a one week planning horizon.     

Synchronized routing of seasonal products through a production/distribution network

This paper presents a multi-period vehicle routing problem for a large-scale production and distribution network. The vehicles must be routed in such a way as to minimize travel and inventory costs over a multi-period horizon, while also taking retailer demands and the availability of products at a central production facility into account. The network is composed of one distribution center and hundreds of retailers. Each retailer has its demand schedule representing the total number of units of a given product that should have been received on a given day. Many high value products are distributed. Product availability is determined by the production facility, whose production schedule determines how many units of each product must be available on a given day. To distribute these products, the routes of a heterogeneous fleet must be determined for a multiple period horizon. The objective of our research is to minimize the cost of distributing products to the retailers and the cost of maintaining inventory at the facility. In addition to considering product availability, the routing schedule must respect many constraints, such as capacity restrictions on the routes and the possibility of multiple vehicle trips over the time horizon. In the situation studied, no more than 20 product units could be carried by a single vehicle, which generally limited the number of retailers that could be supplied to one or two per route. This article proposes a mathematical formulation, as well as some heuristics, for solving this single-retailer-route vehicle routing problem. Extensions are then proposed to deal with the multiple-retailer-route situation.     

Emergency Logistics Planning in Natural Disasters

Logistics planning in emergency situations involves dispatching commodities (e.g., medical materials and personnel, specialised rescue equipment and rescue teams, food, etc.) to distribution centres in affected areas as soon as possible so that relief operations are accelerated. In this study, a planning model that is to be integrated into a natural disaster logistics Decision Support System is developed. The model addresses the dynamic time-dependent transportation problem that needs to be solved repetitively at given time intervals during ongoing aid delivery. The model regenerates plans incorporating new requests for aid materials, new supplies and transportation means that become available during the current planning time horizon. The plan indicates the optimal mixed pick up and delivery schedules for vehicles within the considered planning time horizon as well as the optimal quantities and types of loads picked up and delivered on these routes. In emergency logistics context, supply is available in limited quantities at the current time period and on specified future dates. Commodity demand is known with certainty at the current date, but can be forecasted for future dates. Unlike commercial environments, vehicles do not have to return to depots, because the next time the plan is re-generated, a node receiving commodities may become a depot or a former depot may have no supplies at all. As a result, there are no closed loop tours, and vehicles wait at their last stop until they receive the next order from the logistics coordination centre. Hence, dispatch orders for vehicles consist of sets of “broken” routes that are generated in response to time-dependent supply/demand. The mathematical model describes a setting that is considerably different than the conventional vehicle routing problem. In fact, the problem is a hybrid that integrates the multi-commodity network flow problem and the vehicle routing problem. In this setting, vehicles are also treated as commodities. The model is readily decomposed into two multi-commodity network flow problems, the first one being linear (for conventional commodities) and the second integer (for vehicle flows). In the solution approach, these sub-models are coupled with relaxed arc capacity constraints using Lagrangean relaxation. The convergence of the proposed algorithm is tested on small test instances as well as on an earthquake scenario of realistic size.     

Determining a common production cycle time for an economic lot scheduling problem with deteriorating items

This paper considers the economic lot scheduling problem (ELSP) for a production-inventory system where items produced are subject to continuous deterioration. The problem is to schedule multiple products to be manufactured on a single machine repetitively over an infinite planning horizon. Each product is assumed to have a significant rate of deterioration. Only one product can be manufactured at a time. The demand rate for each product is constant, but an exponential distribution is used to represent the distribution of the time to deterioration. A common cycle time policy is assumed in the production process. A near optimal production cycle time is derived under conditions of continuous review, deterministic demand, and no shortage.     

A network flow model for the optimal allocation of both foldable and standard containers

This paper considers a multi-port and multi-period container planning problem of shipping companies that use both standard and foldable containers. A company must decide which number of empty containers of each type to purchase and reposition at each port within a defined period to minimize the total purchasing, repositioning, and storage costs.We develop a model to optimally allocate both foldable and standard containers. We show that a single commodity minimum cost network flow algorithm solves the problem by proving that a two commodity flow problem can be modeled as a single commodity flow problem.     

Tactical planning of offshore petroleum production

This paper describes a model for tactical planning of Norwegian petroleum production. The problem involves regulation of production levels from wells, splitting of production flows into oil and gas products, further processing of gas and transportation in a pipeline network. Blending and processing of gas is necessary to satisfy quality requirements in the markets. The problem is formulated with multi-component flows, regulation alternatives in production, non-linear splitting for chemical processing and linear quality constraints on composite products. Production and splitting are modelled with integer requirements. The model is implemented in Xpress^MP with a Visual Basic supported user interface in Excel. It is constructed in cooperation with the major Norwegian oil company, Statoil and can identify optimal production patterns and assist in planning of possible shut-downs, demonstrate system robustness to customers and aid in contract negotiations.     

A discrete bilevel brain storm algorithm for solving a sales territory design problem: a case study

A sales territory design problem faced by a manufacturing company that supplies products to a group of customers located in a service region is addressed in this paper. The planning process of designing the territories has the objective to minimizing the total dispersion of the customers without exceeding a limited budget assigned to each territory. Once territories have been determined, a salesperson has to define the day-by-day routes to satisfy the demand of customers. Currently, the company has established a service level policy that aims to minimize total waiting times during the distribution process. Also, each territory is served by a single salesperson. A novel discrete bilevel optimization model for the sales territory design problem is proposed. This problem can be seen as a bilevel problem with a single leader and multiple independent followers, in which the leader’s problem corresponds to the design of territories (manager of the company), and the routing decision for each territory corresponds to each follower. The hierarchical nature of the current company’s decision-making process triggers some particular characteristics of the bilevel model. A brain storm algorithm that exploits these characteristics is proposed to solve the discrete bilevel problem. The main features of the proposed algorithm are that the workload is used to verify the feasibility and to cluster the leader’s solutions. In addition, four discrete mechanisms are used to generate new solutions, and an elite set of solutions is considered to reduce computational cost. This algorithm is used to solve a real case study, and the results are compared against the current solution given by the company. Results show a reduction of more than 20% in the current costs with the solution obtained by the proposed algorithm. Furthermore, a sensitivity analysis is performed, providing interesting managerial insights to improve the current operations of the company.     

A robust optimization model for agile and build-to-order supply chain planning under uncertainties

Supply chain planning as one of the most important processes within the supply chain management concept, has a great impact on firms’ success or failure. This paper considers a supply chain planning problem of an agile manufacturing company operating in a build-to-order environment under various kinds of uncertainty. An integrated optimization approach of procurement, production and distribution costs associated with the supply chain members has been taken into account. A robust optimization scenario-based approach is used to absorb the influence of uncertain parameters and variables. The formulation is a robust optimization model with the objective of minimizing the expected total supply chain cost while maintaining customer service level. The developed multi-product, multi-period, multi-echelon robust mixed-integer linear programming model is then solved using the CPLEX optimization studio and guidance related to future areas of research is given.     

Optimisation of sludge treatment and transport

In this paper we describe some work carried out in the UK into improving the effectiveness of a waste treatment and distribution network. Sludge is the name given to (treated) waste water and sewage. It is collected at small facilities and requires further treatment before it can be disposed of. We develop a linear programming model for the problem of effectively treating and distributing sludge. This model has been implemented in a large UK regional water company, Yorkshire Water.     

A robust optimization model for multi-site production planning problem in an uncertain environment

This paper addresses the multi-site production planning problem for a multinational lingerie company in Hong Kong subject to production import/export quotas imposed by regulatory requirements of different nations, the use of manufacturing factories/locations with regard to customers’ preferences, as well as production capacity, workforce level, storage space and resource conditions at the factories. In this paper, a robust optimization model is developed to solve multi-site production planning problem with uncertainty data, in which the total costs consisting of production cost, labor cost, inventory cost, and workforce changing cost are minimized. By adjusting penalty parameters, production management can determine an optimal medium-term production strategy including the production loading plan and workforce level while considering different economic growth scenarios. The robustness and effectiveness of the developed model are demonstrated by numerical results. The trade-off between solution robustness and model robustness is also analyzed.