Multisite Planning under Demand and Transportation Time Uncertainty: Robust Optimization and Conditional Value-at-Risk Frameworks

Abstract

The operational planning of a multisite production and distribution network entails determining the daily production and shipment profiles for the supply chain under consideration. The generated profiles should provide a tight upper bound on the true production capacity of the supply chain to ensure the maximization of customer satisfaction along with the minimization of resource misallocation. With an operational planning time horizon of 1−3 months, it is also imperative to take into account pertinent parameter uncertainty, so that the production and shipment profiles are not only a tight upper bound on the supply chain’s production capacity but also immune to the different forms of system uncertainty, such as demand due date, demand amount, and transportation time uncertainty. These types of uncertainty have been explicitly considered by means of the robust optimization framework and conditional value-at-risk theory. An industrial case study has been undertaken to demonstrate the viability of the propos...