Integrating Mathematical and Simulation Approach for Optimizing Production and Distribution Planning With Lateral Transshipment in a Supply Chain

Supply chain planning aims to maximize the chain's profit and find an effective way to integrate production and distribution. A mathematical and simulation-based optimizations are two common disciplines in which this study integrates both of them together to consolidate their advantages. A mathematical model is formulated to find an optimal production-distribution plan. Then, the result is fed into a simulation model operating under uncertainty to verify the feasibility of the plan. Our integrated approach tries to find a feasible plan that satisfies both required customer service level and makespan limitation where safety stock is used to hedge against uncertainties, and lateral transshipment is used for emergency measures against excessive fluctuation of customer demand. A case study that optimizes the profit of an entire chain is used to demonstrate the algorithm. The outcomes of the study show that our proposed approach can yield feasible results (with near or even optimal solution) with much faster computational time as compared to the traditional simulation-based optimization.

Analysis of the effects of Lead-Time variation and Lateral Transshipment insertion in a Supply Chain Network

In a supply chain, inventory is the single largest source of costs for a company. This is due to the various physical and informational activities that accompany inventory management, primarily the holding and transportation of inventory. Companies are looking to streamline these activities and minimize the associated costs. One of the most coveted models to jointly solve these two problems is the Inventory Routing Problem (IRP), which will be the focus of this study. This paper addresses the case of a deterministic replenishment demand in a distribution network consisting of a supplier and a number of customers to be served by a single vehicle over a finite planning horizon. We will first study the impact of increasing supplier lead times on network costs. Then, we will study the effects of the Lateral Transshipment (LT) technique on the overall network cost. A mathematical model is developed and solved by an exact method. The results obtained will show that LT is an effective tool capable of improving the total network cost and balancing the customers’ inventory level.

Designing a disruption-aware supply chain network considering precautionary and contingency strategies: A real-life case study

Due to the high risk in the business environment, supply chains must adopt a tailored mechanism to deal with disruptions. This research proposes a multi-objective formulation to design a robust and resilient forward supply chain under multiple disruptions and uncertainty. The mentioned objective functions include minimizing the total cost, environmental impacts, and the network non-resiliency associated with the supply chain simultaneously countered using an augmented ε-constraint method. A Mulvey robust optimization approach is also utilized to deal with uncertainty. Ultimately, the developed model is validated based on three datasets associated with a case study of the steel industry. The results indicate that preventive and mitigation resilience strategies have significantly promoted the supply chain's capabilities to deal with disruptions. Controlling network resiliency via non-resiliency measures has also created a risk-aware and robust structure in the incidence of disturbances. Numerical results reveal that multiple sourcing, lateral transshipment, and fortification of facilities will lead to the greatest cost-efficiency in the case study. Observations also indicate that the fortified supply chain will be highly economically viable in the long run due to the reduction of costs resulting from lost sales, unnecessary inventory holding, and the company's credit risk.

Stochastic inventory-routing problem with lateral transshipment for perishable product

Purpose This study aims to design a supply chain network in an uncertain environment while exists two options for distribution of the perishable product and production lot-sizing is concerned. Design/methodology/approach Owing to the complexity of the mathematical model, a solution approach based on a Lagrangian relaxation (LR) heuristic is developed which provides good-quality upper and lower bounds. Findings The model output is discussed through various examples. The introduction of some enhancements and using some heuristics results in better outputs in the solution procedure. Practical implications This paper covers the modeling of some real-world problems in which demand is uncertain and managers face making some concurrent decisions related to supply chain management, transportation and logistics and inventory control issues. Furthermore, considering the perishability of product in modeling makes the problem more practically significant as these days there are many supply chains handling dairy and other fresh products. Originality/value Considering uncertainty, production, transshipment and perishable product in the inventory-routing problem makes a new variant that has not yet been studied. The proposed novel solution is based on the LR approach that is enhanced by some heuristics and some valid inequalities that make it different from the current version of the LR used by other studies.

Two-Echelon Inventory Model With Service Consideration and Lateral Transshipment

This paper considers a two-echelon inventory system with service consideration and lateral transshipment. So far, researchers have not extensively considered the use of lateral transshipment for such systems. Demand arrivals at both echelons follow the Poisson process. We introduce a continuous review base stock policy for the system in steady state, which determined the expected level for on-hand inventory, expected lateral transshipment level and expected backorder level. We showed that the model satisfied convexity with respect to base stock level. Computational experiments showed that the model with lateral transshipment performed better that the model without lateral transshipment.