An integer linear programming model to support customer-driven material planning in synchronised, multi-tier supply chains

Abstract

This paper describes an integer linear programming model conceived as an alternative to a traditional material requirements planning (MRP) system for extending the concept of supply chain synchronisation upstream in a multi-tier supply chain. In this model, we assume there is an incumbent application for transmitting original equipment manufacturer (OEM) requirements to first-, second- and third-tier suppliers. The proposed model is regarded as being embedded within a web-enabled, multi-tier, supply chain information system that provides the application for transmitting the production requirements. The principal motivation for having second- and third-tier suppliers that are synchronised with OEM and first-tier activity is the significant inventory, lead time and responsiveness gains that can potentially be achieved. Here, inventory is considered as a whole across a supply chain, and stock-outs are prohibited for the first-tier supplier. For illustration purposes, an example based on a real, automotive case study is provided. The model results proved better in terms of inventory and bullwhip reduction than those found in a previous simulation-based approach. Also, a comparison of the proposed case results with those of a conventional MRP application is provided.