Optimizing an integrated supply chain

Many optimization models have been developed to make specific decisions in supply chains. However, when these decisions are integrated together, supply chains may operate more efficiently. This research presents a basic model for designing a supply chain network and two integrated models that were developed from this basic model: a strategic-tactical (S-T) model and a tactical-operational (T-O) model. The basic model is a single-period model that makes the tactical decisions of determining the optimal configuration of the manufacturing plants, independent distributors, and customers in the distribution network assuming that there is only one distribution center (DC) with infinite capacity. The S-T model is similar to the basic one but includes multiple periods and makes the decisions for the locations and sizes of several DC's. The DC sizes and locations are considered as strategic decisions since these are made for long periods of time, and the distribution decisions for each customer are considered as tactical since these are made for each period in the model and are used for planning purposes. The T-O model is a multi-period model that makes the distribution decisions of supplying the customer demands and making the replenishment orders for the DC's. It uses as part of the input the results from the S-T model for DC locations and sizes and the final list of customers as well as the actual customer orders. This research also presents a step-by-step procedure to deal with the sensitivity and uncertainty in demand that is incurred in the S-T model due to the use of demand forecasts. All the models developed in this research contain multiple criteria to consider customer service objectives in addition to maximizing the profit. Finally, a flowchart was presented to show the integration of the S-T and T-O models. The functionality and applicability of all these models were shown by implementing them in a real-world case study of a consumer goods company.