Robust supply chain design under uncertain demand in agile manufacturing.

*(English)*Zbl 1175.90049Summary: This paper considers a supply chain design problem for a new market opportunity with uncertain demand in an agile manufacturing setting. We consider the integrated optimization of logistics and production costs associated with the supply chain members. These problems routinely occur in a wide variety of industries including semiconductor manufacturing, multi-tier automotive supply chains, and consumer appliances to name a few. There are two types of decision variables: binary variables for selection of companies to form the supply chain and continuous variables associated with production planning. A scenario approach is used to handle the uncertainty of demand. The formulation is a robust optimization model with three components in the objective function: expected total costs, cost variability due to demand uncertainty, and expected penalty for demand unmet at the end of the planning horizon. The increase of computational time with the numbers of echelons and members per echelon necessitates a heuristic. A heuristic based on a \(k\)-shortest path algorithm is developed by using a surrogate distance to denote the effectiveness of each member in the supply chain. The heuristic can find an optimal solution very quickly in some small- and medium-size cases. For large problems, a “good” solution with a small gap relative to our lower bound is obtained in a short computational time.

##### MSC:

90B06 | Transportation, logistics and supply chain management |

90B15 | Stochastic network models in operations research |

90C35 | Programming involving graphs or networks |

90C59 | Approximation methods and heuristics in mathematical programming |

PDF
BibTeX
XML
Cite

\textit{F. Pan} and \textit{R. Nagi}, Comput. Oper. Res. 37, No. 4, 668--683 (2010; Zbl 1175.90049)

Full Text:
DOI

**OpenURL**

##### References:

[1] | Goldman, S.L.; Nagel, R.N.; Preiss, K., Agile competitors and virtual organizations, (1995), Van Nostrand Reinhold New York |

[2] | Chauhan, S.S.; Proth, J.-M.; Sarmiento, A.M.; Nagi, R., Opportunistic supply chain formation from qualified partners for a new market demand, Journal of the operational research society, 57, 1089-1099, (2006) · Zbl 1171.90332 |

[3] | Nahmias, S., Production and operations analysis, (2004), McGraw-Hill New York |

[4] | Sarmiento, A.M.; Nagi, R., A review of integrated analysis of production – distribution systems, IIE transactions, special issue on manufacturing logistics, 31, 1061-1074, (1999) |

[5] | Russell, R.; Chiang, W.-C.; Zepeda, D., Integrating multi-product production and distribution in newspaper logistics, Computers & operations research, 1576-1588, (2008) · Zbl 1278.90051 |

[6] | Elhedhli, S.; Goffin, J.-L., Efficient production – distribution system design, Management science, 51, 1151-1164, (2005) · Zbl 1232.90178 |

[7] | Chen, Z.-L.; Vairaktarakis, G.L., Integrated scheduling of production and distribution operations, Management science, 51, 614-628, (2005) · Zbl 1145.90380 |

[8] | Jung H, Chen FF, Jeong B. A production-distribution coordinating model for third party logistics partnership. In: Proceddings of the 2005 IEEE international conference on automation science and engineering, Edmonton, Canada, August 1-2, Sponsored by IEE, 2005. p. 99-104. |

[9] | Boudia M, Dauzere-Peres S, Prins C, Louly MAO. Integrated optimization of production and distribution for several products. In: Proceedings—ICSSSM’06: 2006 international conference on service systems and service management, 2007. p. 272-7. |

[10] | Chung S-H, Chung I-P, Lee AHI. Collaborative production-distribution planning for semiconductor production turnkey service. In: Proceedings of the international conference on computational science and its applications—ICCSA 2007, 2007. p. 860-70. |

[11] | Nishi, T.; Konishi, M.; Ago, M., A distribution decision making system for integrated optimization of production scheduling and distribution for aluminum production line, Computers and chemical engineering, 31, 1205-1221, (2007) |

[12] | Kim, Y.; Yun, C.; Park, S.B.; Park, S.; Fan, L.T., An integrated model of supply network and production planning for multiple fuel products of multi-site refineries, Computers and chemical engineering, 32, 2529-2535, (2008) |

[13] | Liang, D.; Wilhelm, W.E., Decomposition schemes and acceleration techniques in application to production-assembly-distribution system design, Computers & operations research, 35, 4010-4026, (2008) · Zbl 1278.90130 |

[14] | Shen, Z.-J.M.; Qi, L., Incorporating inventory and routing costs in strategic location models, European journal of operational research, 179, 372-389, (2006) · Zbl 1111.90012 |

[15] | Amiri, A., Designing a distribution network in a supply chain system: formulation and efficient solution procedure, European journal of operational research, 171, 567-576, (2006) · Zbl 1090.90024 |

[16] | Banerjee, A.; Burton, J.; Banerjee, S., A simulation study of lateral shipments in single supplier, multiple buyers supply chain networks, International journal of production economics, 81-82, 103-114, (2003) |

[17] | Ozdemir, D.; Yucesan, E.; Herer, Y., Multi-location transshipment problem with capacitated transportation, European journal of operational research, 175, 602-621, (2006) · Zbl 1137.90356 |

[18] | Zhang, C.; Tan, G.-W.; Robb, D.; Zheng, X., Sharing shipment quantity information in the supply chain, Omega, 34, 427-438, (2006) |

[19] | Chien, T., Determining profit-maximizing production/shipping policies in a one-to-one direct shipping, stochastic demand environment, European journal of operational research, 64, 83-102, (1993) |

[20] | Hansen, P.; Hegedahl, B.; Hjortkjaer, S.; Obel, B., A heuristic solution to the warehouse location-routing problem, European journal of operational research, 76, 111-127, (1994) · Zbl 0925.90245 |

[21] | Shen, Z.-J.M., A profit-maximizing supply chain network design model with demand choice flexibility, European journal of operational research, 34, 673-682, (2006) · Zbl 1112.90013 |

[22] | Zhang, S., On a profit maximizing location model, Annals of operations research, 103, 251-260, (2001) · Zbl 1009.90063 |

[23] | Chen, C.-L.; Lee, W.-C., Multi-objective optimization of multi-echelon supply chain networks with uncertain product demands and prices, Computers and chemical engineering, 28, 1131-1144, (2003) |

[24] | Che, Z.; Wang, H.; Sha, D., A multi-criterion interaction-oriented model with proportional rule for designing supply chain networks, Expert systems with applications, 33, 1042-1053, (2006) |

[25] | Altiparmak, F.; Gen, M.; Lin, L.; Paksoy, T., A genetic algorithm approach for multi-objective optimization of supply chain networks, Computers & industrial engineering, 51, 196-215, (2006) |

[26] | Gutierrez, G.; Kouvelis, P.; Kurawala, A., A robustness approach to uncapacitated network design problems, European journal of operational research, 94, 362-376, (1996) · Zbl 0953.90503 |

[27] | MirHassani, S.; Lucas, G.; Mitra, G.; Messina, E.; Poojari, C., Computational solution of capacity planning models under uncertainty, Parallel computing, 94, 511-538, (2000) · Zbl 0942.90030 |

[28] | Tsiakis, P.; Shah, N.; Pantelides, C., Design of multi-echelon supply chain networks under demand uncertainty, Industrial & engineering chemistry research, 40, 3585-3604, (2001) |

[29] | Santoso, T.; Ahmed, S.; Goetschalckx, G.; Shapiro, A., A stochastic programming approach for supply chain network design under uncertainty, European journal of operational research, 167, 96-115, (2005) · Zbl 1075.90010 |

[30] | Leung, S.; Tsang, S.; Ng, W.; Wu, Y., A robust optimization model for multi-site production planning problem in an uncertain environment, European journal of operational research, 181, 224-238, (2007) · Zbl 1121.90329 |

[31] | Mulvey, J.; Vanderbei, R.; Zenios, S., Robust optimization of large-scale systems, Operations research, 43, 264-281, (1995) · Zbl 0832.90084 |

[32] | Yu, C.; Li, H., A robust optimization model for stochastic logistic problems, International journal of production economics, 64, 385-397, (2000) |

[33] | Wagner, H., Principles of operations research, (1975), Prentice-Hall New Jersey |

[34] | Shier, D., Iterative methods for determine the k shortest paths in a network, Networks, 6, 205-229, (1976) · Zbl 0364.90105 |

[35] | Rink, K.; Rodin, E.; Sundarapandian, V., A simplification of the double-sweep algorithm to solve the k-shortest path problem, Applied mathematics letters, 13, 77-85, (2000) · Zbl 0965.90054 |

[36] | Pan F, Nagi R. Multi-echelon supply chain network design in agile manufacturing. Submitted for publication. · Zbl 1175.90049 |

[37] | Vidal, C.J.; Goetschalckx, M., Strategic production-distribution models: a critical review with emphasis on global supply chain models, European journal of operational research, 98, 1-18, (1997) · Zbl 0922.90062 |

[38] | Goetschalckx, M.; Vidal, C.; Dogan, K., Modeling and design of global logistics systems: a review of integrated strategic and tactical models and design algorithms, European journal of operational research, 143, 1-18, (2002) · Zbl 1073.90501 |

[39] | Schmidt, G.; Wilhelm, W., Strategic, tactical and operational decisions in multi-national logistics networks: a review and discussion of modeling issues, International journal of production research, 38, 1501-1523, (2000) · Zbl 0944.90551 |

[40] | Meixell, M.; Gargeya, V., Global supply chain design: a literature review and critique, Transportation research part E, 41, 531-550, (2005) |

[41] | Goh, M.; Lim, J.; Meng, F., A stochastic model for risk management in global supply chain networks, European journal of operational research, 182, 164-173, (2007) · Zbl 1127.90038 |

[42] | Balaji, K.; Viswanadham, N., A tax integrated approach for global supply chain network planning, IEEE transactions on automation science and engineering, 5, 587-596, (2008) |

[43] | Nagurney, A.; Matsypura, D., Global supply chain network dynamics with multicriteria decision-making under risk and uncertainty, Transportation research part E, 41, 585-612, (2005) |

[44] | Stirn L, Drobne S. Global optimization of the supply chain costs. In: Proceedings of the 9th international symposium on operational research in Slovenia, Nava Gorica, Slovenia, 2007. p. 177-83. |

[45] | Chen, H.-Y.; Lin, C.-W.; Yih, Y., Production-distribution network design of a global supply chain alliance from the key Player’s perspective, International journal of production research, 45, 245-265, (2007) · Zbl 1141.90423 |

[46] | Cruz, J.; Nagurney, A.; Wakolbinger, T., Financial engineering of the integration of global supply chain networks and social networks with risk management, Naval research logistics, 53, 674-696, (2006) · Zbl 1106.91055 |

This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. It attempts to reflect the references listed in the original paper as accurately as possible without claiming the completeness or perfect precision of the matching.