Cross-facility management of production and transportation planning problem

Abstract

This paper studies an integrated production and transportation planning problem in a two-stage supply chain. This supply chain consists of a number of facilities, each capable of producing the final product, and a number of retailers. We assume that retailers’ demands are known deterministically and there are no production or transportation capacity constraints. We formulate the problem as a network flow problem with fixed charge costs. This is an NP-hard problem. To solve the problem we propose a primal-dual based heuristic that generates upper and lower bounds and runs in O ( FRT 2 ) . The quality of the upper and lower bounds is tested on a large set of randomly generated problems. The maximum error reported for these problems is 4.36% and the maximum running time is 7.65 cpu seconds. Scope and purpose Increased competition and increased customers demands drives companies into being part of large and complex supply chains. Coordinating production, inventory and transportation decisions in complex supply chains is a challenging problem. This is the reason that for many years practitioners and academicians have looked at these problems separately. In this paper we propose a mathematical model that takes an integrated view of production and transportation decisions of a supply chain. We propose a solution procedure and show that it produces good quality solutions in a short amount of time.