A strategic model for supply chain design with logical constraints: formulation and solution

Abstract

This paper proposes a strategic production–distribution model for supply chain design with consideration of bills of materials (BOM). Logical constraints are used to represent BOM and the associated relationships among the main entities of a supply chain such as suppliers, producers, and distribution centers. We show how these relationships are formulated as logical constraints in a mixed integer programming (MIP) model, thus capturing the role of BOM in the selection of suppliers in the strategic design of a supply chain. A test problem is presented to illustrate the effectiveness of the formulation and solution strategy. The results and their managerial implications are discussed. Scope and purpose Supply chain design is to provide an optimal platform for efficient and effective supply chain management. The problem is often an important and strategic operations management problem in supply chain management. This paper shows how the mixed integer programming modeling techniques can be applied to supply chain design problem, where some complicated relations, such as bills of materials, are involved. We discuss how to solve such a complicated model efficiently.