A mixed integer nonlinear multiperiod model for supply chain management of a company in the retail sector

Abstract

The fluctuations in the business environment and seasonal variations characteristic of food supply chains contribute greatly to the increasing complexity of the entire Supply Chain planning. In the present paper, quantitative models are applied to support the decision-making purchasing management department of a retail company. Specifically, a multiperiod mathematical model was developed with the aim of optimizing decision-making of the purchasing managers. The developed model consists of a multiperiod Mixed Integer Nonlinear Programming model, with the objective to minimize the ratio between how much is costing the company to move the products along the Supply Chain and the products’ costs. It is discussed how to order the product, what is the most advantageous storage mode and whether it is preferable to order once or twice a week. Real instances, provided by a Portuguese retail company, regarding the demand for one year are tested for two scenarii, which are used currently by the company. The results show that the proposed model can reduce, on both scenarios, the ratio between operational costs and merchandise costs, for almost all products, and therefore it can be an important tool for supporting decision-making of the purchasing manager.