A Theoretical Approach to Supply Chain Optimization

A theoretical approach to supply chain optimization through solution of an LP-problem

1. Key Questions
• What are the number of mfg nodes, distr. nodes, cust. nodes and inventory nodes? [M, D, I] = N, locations [x] Where is demand located per manufacturing type / platform? [c] What are the reliability / infrastructure factors associated between each node? [r] What are the cost factors associated with each possible country & distribution node? [cc, dc] What is the overall flexibility from the supply chain, i.e. possible paths involved? [f] What are the time factors associated with each type of transportation node? [t] What are the priority factors associated with customer nodes? [p]

2. Heuristic Model
a) Define variables

3. Optimized Variables • Binary variables (location exists or doesn’t exist) • Variables (m, d, i) solutions to the optimization described in 2. b).
The variables that form the solution space to the max-min problem in 2 are the location of nodes [m, d, i]

xn  d k  N l rn  xn  ccn  xn  dcn  xn  t n  xn  f n   mn , d n , in  

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b) Optimize the LP problem •

  N1cc1...N n ccn , N1dc1...N n dcn ,   min   N t ...N t  11 n n     N1r1...N n rn , N1 p1...N n pn ,   max   N f ...N f  n n  1 1 

• •

Asking questions to get input to key variables associated with location of mfg, dist. & inv. nodes.

Combining these variables into a heuristic model solving the LP problem spanned by the variables

Supply Chain Optimization • Theory One-Pager

18 oktober 2012 1