Integrated planning in a multi-site procurement, production and distribution system under rolling schedule

Abstract

This paper develops a mixed integer programming model for integrated planning of multi-site procurement, production and distribution system at aggregate and detailed levels under a rolling schedule in the context of a multinational consumer goods company. The model considers a trade-off among plan change cost or nervousness cost, safety stock (service level) violation penalty to a given customer service level, inventory carrying cost, external storage cost and transportation cost, limitations of storage space, raw material availability and production capacity. The model was applied to 100 randomly generated industry size problem instances involving 18,450 variables including 832 integer variables and 5,347 constraints. With an imposed limit of 300 seconds of CPU time on an integer programming solver, solution of the model yielded average gap of 0.43% for these problems.