Integrated Production-Distribution Planning with Time Dependent Demand in Multi-Echelon Supply Chain

Abstract

This paper discusses an integrated production-distribution planning for a 4-echelons supply chain system which consists of a manufacturer with a continuous production process, a distribution center, a number of distributors and a number of retailers. This situation can be found, for example, in a fertilizer production and distribution systems. Considering a time-dependent demand pattern which is approximated by a polynomial function at retailers that fluctuates by time and may not be identical for each retailer, and all entities of the entire echelon in the supply chain are allowed to hold inventory, the integrated production-distribution planning model is developed using the following approaches, i.e.: coordinated policy, echelon inventory concept and single cycle time policy. The periodic review inventory system is used as a basic model for developing the model. The model determines a production policy for the manufacturer and replenishment policies for all entities involved in the distribution system in order to minimize a total system cost. The total system cost consists of set-up/ordering costs, holding costs, backorder costs and transportation costs of all entities of the supply chain system. A heuristics solution procedure is developed to find the solution. Since the demand depends on the time, the level of maximum inventory is not equal for each period at the manufacturer, the distribution center, the distributors and the retailers.