Flexible design‐planning of supply chain networks

Abstract

Nowadays market competition is essentially associated to supply chain (SC) improvement. Therefore, the locus of value creation has shifted to the chain network. The strategic decision of determining the optimal SC network structure plays a vital role in the later optimization of SC operations. This work focuses on the design and retrofit of SCs. Traditional approaches available in literature addressing this problem usually utilize as departing point a rigid predefined network structure which may restrict the opportunities of adding business value. Instead, a novel flexible formulation approach which translates a recipe representation to the SC environment is proposed to solve the challenging design-planning problem of SC networks. The resulting mixed integer linear programming model is aimed to achieve the best NPV as key performance metric. The potential of the presented approach is highlighted through illustrative examples of increasing complexity, where results of traditional rigid approaches and those offered by the flexible framework are compared. The implications of exploiting this potential flexibility to improve the SC performance are highlighted and are the subject of our further research work. V V C 2009 American Institute of Chemical Engineers AIChE J, 55: 1736AIChE J, 55: -1753AIChE J, 55: , 2009 Keywords: supply chain management, network design, flexibility, MILP Introduction A SC may be defined as a collaborative network wherein a number of various business entities work together in an effort to: (1) acquire raw materials, (2) convert these raw materials into specified final products, and (3) deliver these final products to retailers. This chain is traditionally characterized by a forward flow of materials and a backward flow of information.1 Usually in SC literature, business entities are classified by echelon type (e.g., suppliers, manufacturers, distributors, retailers).Subsequently, supply chain management (SCM) can be defined as the management of material, information, and financial flows through a SC that aims at producing and delivering products or services to consumers. 2 The main objectives usually are to achieve desired consumer satisfaction levels and/or satisfactory financial returns by synchronizing and coordinating the SC members activities. The need for such coordination grows out of several trends in the marketplace, such as the globalization of market economies. Business global perspective has led to the availability of a vast set of alternative sources of materials and other inputs as well as a wider array of potential customers. Customers' changing expectations regarding value of goods and services, combined with advances in technology and the availability of information, have driven the formation of interorganizational networks. 3 The SC modeling problem is very complex. In practice, it is usually helpful to use the time dimension to establish a hierarchical order so as to facilitate SC coordination. At the top level, long-term or strategic planning affects the achievement of g...

Scenario-based dynamic negotiation for the coordination of multi-enterprise supply chains under uncertainty

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