Design of Robust Supply Chains: An Integrated Hierarchical Planning Approach

Design of Robust Supply Chains: An Integrated Hierarchical Planning Approach

El-Houssaine Aghezzaf (Ghent University, Belgium) and Carles Sitompul (Ghent University, Belgium)
DOI: 10.4018/978-1-4666-2098-8.ch011
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Abstract

In a supply chain operating under uncertainty, a possible approach to reduce the complexity and scope of the planning process is to organize all involved critical planning decisions in a hierarchical structure. This chapter attempts to explore new ways of integrating production and scheduling plans in a complex supply chain taking into account effects of some specific uncertainty types. In particular, uncertainty types inherent to the demand and to the process or equipment are considered. To deal with demand uncertainty at the strategic level, the safety stock placement problem in supply chains with limited production capacities is investigated. Results of this analysis and its consequences at the design level are reported and discussed. At the tactical level, each stage in the supply chain generates its own aggregate plans in order to balance supply and demand. To deal with uncertainty at this level, some robust deterministic planning models are discussed. These models make use only of the readily available data, such as averages and standard deviations, related to the uncertain planning parameters. At the operational level, the issue of disaggregating the generated robust tactical plans into detailed plans is investigated. A model taking into account the progressive deterioration of the production equipment is discussed. The results of some simulations are also reported and discussed.
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Introduction

A supply chain consists of vendors, manufacturers, distribution centers and customers that are connected by flow of materials, money and information as shown in Figure 1. A manufacturer transforms either raw materials into semi-finished products or semi-finished products into finished products. A distribution center is responsible for receiving, sorting, picking and dispatching products into inventories without physically transforming the products. Supply chain management consists of all activities necessary to plan, control and monitor the movement of materials as they flow from their source to the end customer. The aim of a supply chain is naturally to satisfy customer demands in the right level of quantity, quality, and on the right time. We refer the reader to the book “Modeling the supply chain” by Shapiro (2001) for a thorough introduction to modeling in supply chains.

Figure 1.

A typical supply chain network

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