Complex Real-Life Supply Chain Planning Problems

Complex Real-Life Supply Chain Planning Problems

Behnam Fahimnia (University of South Australia, Australia), Mohammad Hassan Ebrahimi (InfoTech International Company, Iran) and Reza Molaei (Iran Broadcasting Services, Iran)
DOI: 10.4018/978-1-4666-1945-6.ch078
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Abstract

Supply chain planning concerns the selection of strategies and methodologies to facilitate the optimal flow of material from raw material suppliers to end-users through procurement, production and distribution activities. Supply chain (SC) implementation has significant impacts on the financial performance of manufacturing and distribution companies. Developing real-life SC models with centralised planning naturally leads to complex models which are difficult to solve optimally. This chapter firstly presents a comprehensive review on the current literature of SC planning and optimisation and classifies the published models based on their complexity. Next, a mixed-integer non-linear formulation is presented for modelling complex real-life SC planning problems which accommodates the identified gaps in the current literature. Evaluation of the available tools and techniques for the optimisation of the proposed SC model will conclude this chapter.
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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.

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