A decentralized supply chain planning model: a case study of hardboard industry

Abstract

This paper presents a new decentralized/distributed decision-making (DDM) supply chain planning model. A supply chain is called decentralized when various decisions are made in different companies trying to optimize their own objectives. The proposed approach is applied to plan a wood supply chain network called Puya Wood Company. The supply chain network design problem discussed in this paper is an integrated multi-echelon, multi-product problem considering total costs of purchasing raw materials/returned product, transportation of raw materials, and inventory holding of raw materials. A coordination mechanism is designed to share information between the retailer model and the manufacturer model called centralized planning. The main contributions of this paper are summarized as follows: (1) presenting a decentralized (distributed) approach in order to address the production and distribution problem in supply chain including manufacturer and retailers and (2) proposing a coordination mechanism in order to handle problems related to production and distribution in a two-echelon supply chain network through a decentralized approach. The proposed model is tested using real case study. Sensitivity analysis is accomplished to find the effects of changing the parameter on the results. The proposed coordination mechanism provides high-quality solutions in reasonable number of iterations for the case study. This coordination mechanism can be applied in other supply chains such as natural gas and oil, water resource management, and crisis and disaster planning.