Optimization of resource flows across the whole supply chain: Application to a case study in the dairy industry

Abstract

This paper deals with the problem of optimally planning the flows of raw materials and products across a linear multiproduct supply chain. Given a known series of products demands along a planning period, the problem consists of optimizing procurement, inventory, production, and distribution decisions for each time-period of the planning horizon. A decomposition procedure is developed to solve the optimization problem in reasonable computational times. The proposal first generates both a set of pickup routes for raw material collection and a set of delivery routes for product distribution through the Column Generation method. Then, these routes are feed into a Mixed-Integer Linear Program modelling the integrated problem. The scope of the optimization approach covers the entire supply chain from sources of raw materials to the end-customers, providing a useful computational tool for assessment of linear supply chains. The aim is to maximize the profit of the company that fabricates and distributes the products. The usefulness and effectiveness of the proposed solution strategy is demonstrated by solving an extensive set of realistic instances for a dairy industry.