Supply chain network optimization considering assembly line balancing and demand uncertainty

Abstract

In supply chain optimisation problems, determining the location, number and capacity of facilities is concerned as strategic decisions, while mid-term and short-term decisions such as assembly policy, inventory levels and scheduling are considered as the tactical and operational decision levels. This paper addresses the optimisation of strategic and tactical decisions in the supply chain network design (SCND) under demand uncertainty. In this respect, a two-stage stochastic programming model is developed in which strategic location decisions are made in the first-stage, while the second-stage contains SCND problem and the assembly line balancing as a tactical decision. In the solution scheme, the combination of sample average approximation and Latin hypercube sampling methods is utilised to solve the developed two-stage mixed-integer stochastic programming model. Finally, computational experiments on randomly generated problem instances are presented to demonstrate the performance and power of developed model in handling uncertainty. Computational experiments showed that stochastic model yields better results compared with deterministic model in terms of objective function value, i.e. the sum of the first-stage costs and the expected second-stage costs. This issue proved that uncertainty would be a significant and fundamental element of developed model and improve the quality of solutions.