The design of Make-to-Order supply networks under uncertainties using simulation and optimisation

Abstract

This paper addresses the problem of designing Make-to-Order (MTO) driven supply networks as is faced by producers of industrial goods. A major challenge in MTO network design is to estimate the operational performance of candidate networks. In particular, the stochastic and dynamic nature of order arrivals and fulfilment processes as well as the need to design a network that enables a timely delivery of ordered products complicate the decision-making. In this paper, a solution approach is presented where simulation is used for assessing the operational performance of candidate networks. The proposed simulation model captures multiple sources of uncertainties and incorporates fundamental control policies for reflecting the autonomous decision-making processes of operational planners. A Variable Neighbourhood Search (VNS) method is presented to guide the search for good network designs. Experiments are conducted on a set of multi-stage networks, where complex products are manufactured in MTO fashion and delivered to customers within a promised order lead time. The results show that our approach effectively produces supply networks that are able to cope with challenges arising from a strong customer orientation.

Keywords:

• supply network design
• Make-to-Order
• on-time delivery
• evaluation by simulation