Complex Real-Life Supply Chain Planning Problems

2. Supply Chain Planning Problem

A SC network includes procurement, manufacturing and distribution organisations working together to profitably provide the right product to the right customer at the right time (see Figure 1). Supply planning concerns with the selection of strategies and methodologies by the participating organisations (i.e. procurement, manufacturing and distribution) for satisfying the SC’s short and long-term objectives (Gavirneni, 2006). From this definition, a SC manager is responsible for numerous decision makings such as the amount of raw material to purchase, production planning and inventory control issues, as well as transportation planning and warehousing decisions. In this chapter, SC is referred to as a production-distribution network in which the procurement activities are not incorporated and the SC network includes a set of manufacturers, warehouses and end-users.

Figure 1.

Configuration of SC network

SC planning is generally accomplished in 3 stages (Torabi & Hassini, 2009). The first stage is the strategic level or long-term planning where the SC configuration is determined (e.g. the location of manufacturing plants and warehouses). The objective at the second stage—tactical level or mid-term planning—is to determine the procurement, production and distribution quantities in order to minimise the overall SC costs while satisfying the customer demands. Finally, the third stage is the operational level or short-term planning where the day-to-day activities are managed according to the work plan drawn at the tactical level.