Integration of aggregate distribution and dynamic transportation planning in a supply chain with capacity disruptions and the ripple effect consideration

Abstract

We study the dynamic planning decisions of a logistics service provider that is in charge of the integrated supply chain (SC) planning. We examine an SC with multiple products, suppliers, transit nodes and customers in a multi-period mode. The logistics service provider is responsible for aggregate distribution planning and operative dynamic transportation planning. It is to decide on aggregate distribution flows as well as on the time-dependent intensities (i.e. transportation batches). These decisions are tightly incorporated but previous research considered them mostly isolated. This is quite natural since these problems contain data of different detail degree, which can be hardly incorporated in only one model. To resolve this problem, we present a hybrid multi-period, multi-commodity distribution–transportation model as an optimal control problem blended with mathematical programming. This contribution has some particular features. First, it extends previous research by elaborating on the dynamic optimal control model. Second, it considers multi-period problem statement with multiple products and alternative transportation channels. Third, we represent the integrated dynamic SC planning in order to take into account the ripple effect. With the results of this study, the dynamic issues in integrated logistics planning in the SC can be addressed, and an intelligent solution to an important problem of SC management has been proposed.