Integration of production, transportation and inventory decisions in supply chains

Abstract

This dissertation studies the integration of production, transportation and inventory decisions in supply chains, while utilizing the same vehicles in the inbound and outbound. The details of integration is studied in two levels: operational and tactical. In the first part of the thesis, we provide an operational level model for coordination of production and shipment schedules in a single stage supply chain. The production scheduling problem at the facility is modelled as belonging to a single process. Jobs that are located at a distant origin are carried to this facility making use of a finite number of capacitated vehicles. These vehicles, which are initially stationed close to the origin, are also used for the return of the jobs upon completion of their processing. In the first part, a model is developed to find the schedules of the facility and the vehicles jointly, allowing effective utilization of the vehicles for both in the inbound and outbound transportation. In the second part of the dissertation, we provide a tactical level model and study a manufacturer’s production planning and outbound transportation problem with production capacities to minimize transportation and inventory holding costs. The manufacturer in this setting can use two vehicle types for outbound shipments. The first type of vehicle is available in unlimited number. The availability of the second type, which is less expensive, changes over time. For each possible combination of operating policies affecting the problem structure, we either provide a pseudo-polynomial algorithm for general cost structure or prove that no such algorithm exists even for linear cost structure. We develop general optimality properties, propose a generic model formulation that is valid for all problems and evaluate the effects of the operating policies on the system performance. The third part of the dissertation considers one of the problems defined in the second part in detail. Motivated by some industry practices, we present formulations for three different solution approaches, which we refer to as the uncoordinated solution, the hierarchically-coordinated solution and the centrallycoordinated solution. These approaches vary in how the underlying production and transportation subproblems are solved, i.e., sequentially versus jointly, or, heuristically versus optimally. We provide intractability proofs or polynomialtime exact solution procedures for the subproblems and their special cases. We also compare the three solution approaches to quantify the savings due to integration and explicit consideration of transportation availabilities.