Network design decisions in supply chain planning
- Structuring global supply chain networks is a complex decision-making process. The typical inputs to such a process consist of a set of customer zones to serve, a set of products to be manufactured and distributed, demand projections for the different customer zones, and information about future conditions, costs (e.g. for production and transportation) and resources (e.g. capacities, available raw materials). Given the above inputs, companies have to decide where to locate new service facilities (e.g. plants, warehouses), how to allocate procurement and production activities to the variousmanufacturing facilities, and how to manage the transportation of products through the supply chain network in order to satisfy customer demands. We propose a mathematical modelling framework capturing many practical aspects of network design problems simultaneously. For problems of reasonable size we report on computational experience with standard mathematical programming software. The discussion is extended with other decisions required by many real-life applications in strategic supply chain planning. In particular, the multi-period nature of some decisions is addressed by a more comprehensivemodel, which is solved by a specially tailored heuristic approach. The numerical results suggest that the solution procedure can identify high quality solutions within reasonable computational time.