Multi-echelon Distribution Network Research Articles

A model predictive control strategy for supply chain optimization

This paper describes a model predictive control strategy to find the optimal decision variables to maximize profit in supply chains with multiproduct, multiechelon distribution networks with multiproduct batch plants. The key features of this paper are: (1) a discrete time MILP dynamic model that considers the flow of material and information within the system; (2) a general dynamic optimization framework that simultaneously considers all the elements of the supply chain and their interactions; and (3), a rolling horizon approach to update the decision variables whenever changes affecting the supply chain arise. The paper compares the behavior of a supply chain under centralized and decentralized management approaches, and shows that the former yields better results, with profit increases of up to 15% as shown in an example problem.

Efficient inventory management in multi-echelon distribution systems

In this paper, an improved DRP method to schedule multi-echelon distribution network is proposed such that order-quantities and order points are dynamically obtained to meet the demand in just in time concept and minimize the out-of-stock probability. The order scheduling method reflects the dynamic characteristics of inventory level changes in the regional distribution centers and the central distribution center. The experiment has been done with various demand distributions, forecast error distributions and lead times. The proposed method was compared with the traditional DRP-based scheduling methods which use different lot-sizing and order point decision techniques. From the result, it is found that the proposed heuristic method yields preferable lot-sizing schedules.

Operations related groups (ORGs): A clustering procedure for production/inventory systems

AbstractMany production/inventory systems contain thousands of stock keeping units (SKUs). In general, it is not computationally (or conceptually) feasible to consider every one of these items individually in the development of control polices and strategies. Our objective here is to develop a methodology for defining groups to support strategic planning for the operations function. Accordingly, such groups should take into consideration all product characteristics which have a significant impact on the particular operations management problem of interest. These characteristics can include many of the attributes which are used in other functional groupings and will most certainly go beyond the cost and volume attributes used in ABC analysis.The ORG methodology is based on statistical clustering and can utilize a full range of operationally significant item attributes. It considers both statistical measures of discrimination and the operational consequences associated with implementing policies derived on the basis of group membership. The main departure of this analysis from earlier work is: 1) the approach can handle any combination of item attribute information that is important for strategy purposes, 2) management's interest in defining groups on the basis of operational factors can be accommodated, 3) statistical discrimination is considered directly, 4) group definition reflects the performance of management policies which are based (in part) on group membership, and 5) the method can be applied successfully to systems with a large number of SKUs.The specific application which motivated development of the ORG methodology was an analysis of distribution strategy for the service parts division of a major automobile manufacturer. The manufacturer was interested in developing optimal inventory stocking policies, which took into account the complexities of its multiechelon distribution network, supplier relationships and customer service targets for each market segment. This manufacturer stocked over 300,000 part numbers in an extensive network with approximately 50 distribution centers and thousands of dealer locations (i.e., 1.5 million SKU/ location combinations). The results of this application indicated that the advantage of using operationally relevant data for grouping and for defining generic, group‐based policies for controlling inventory can be substantial. The ORG methodology can be of value to operations managers in industries with a large number of diverse items.