Design of Multi-echelon Supply Chain Networks under Demand Uncertainty

Abstract

We consider the design of multiproduct, multi-echelon supply chain networks. The networks comprise a number of manufacturing sites at fixed locations, a number of warehouses and distribution centers of unknown locations (to be selected from a set of potential locations), and finally a number of customer zones at fixed locations. The system is modeled mathematically as a mixed-integer linear programming optimization problem. The decisions to be determined include the number, location, and capacity of warehouses and distribution centers to be set up, the transportation links that need to be established in the network, and the flows and production rates of materials. The objective is the minimization of the total annualized cost of the network, taking into account both infrastructure and operating costs. A case study illustrates the applicability of such an integrated approach for production and distribution systems with or without product demand uncertainty.