Integrated supply chain design using multi-criteria optimization

Abstract

Supply chain management (SCM) presents significant opportunities for improving profit margins and reducing cost. It encompasses functional and geographical integration as well as integration of tactical and operational decisions. The functional integration aspects involve purchasing, manufacturing, and logistics within the company and across the supply chain. A supply chain design framework has been developed including linear/mixed integer multi-criteria optimization models for determining the identified supply chain design parameters. The selection of suppliers, determination of production quantities, inventory locations and sizes, selection of transportation method and transported quantities in a multi-stage, multi-level supply chain are investigated. Additional criteria including first-time quality (FTQ) and suppliers on-time delivery risk with and without allowing splitting of customer demand between suppliers are considered. An example of typical automotive power train supply chain design and decision issues is used to illustrate the effect of various factors.