A dynamic multi-plant lot-sizing and distribution problem

Abstract

In this paper, we investigate a multi-plant, production planning and distribution problem for the simultaneous optimisation of production, inventory control, demand allocation and distribution decisions. The objective of this rich problem is to satisfy the dynamic demand of customers while minimising the total cost of production, inventory and distribution. By solving the problem, we determine when the production needs to occur, how much has to be produced in each of the plants, how much has to be stored in each of the warehouses and how much needs to be delivered to each customer in each period. On a large real data-set inspired by a case obtained from an industrial partner, we show that the proposed integration is highly effective. Moreover, we study several trade-offs in a detailed sensitivity analysis. Our analyses indicate that the proposed scenarios give the company competitive advantage in terms of reduced total logistics cost, and also highlight more possibilities that become available taking advantage of an integrated approach towards logistics planning. These abundant opportunities are to be synergised and exploited in an interconnected open global logistics system.

Keywords:

• physical internet
• dynamic lot-sizing
• integrated supply chain planning
• production
• inventory
• distribution
• optimization

Acknowledgements

The authors would like to thank Professor Benoit Montreuil, Alexandre Morneau and Edith Brotherton for their help and support. We thank an associate editor as well as three anonymous referees for their valuable comments.

Notes

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was partly funded by the Canadian Natural Science and Engineering Research Council (NSERC) [grant number 2014-05764].