Title: An integrated model for production, inventory and distribution problem with direct shipment

Authors: Annisa Kesy Garside, Ahmad Rusdiansyah

Addresses: Department of Industrial Engineering, Muhammadiyah Malang University, Jalan Raya Tlogomas No. 246, Malang, Indonesia; Logistics & Supply Chain Management (LSCM) Laboratory, Department of Industrial Engineering, Sepuluh Nopember Institute of Technology (ITS), Kampus ITS Sukolilo, Surabaya 60111, Indonesia. ' Logistics & Supply Chain Management (LSCM) Laboratory, Department of Industrial Engineering, Sepuluh Nopember Institute of Technology (ITS), Kampus ITS Sukolilo, Surabaya 60111, Indonesia

Abstract: The necessity of reducing costs and inventory along supply chain has made production-distribution coordination a key point. In this paper, we develop an integrated production-inventory-distribution model for two stages supply chain with multiple plants and distribution centres, over multiple time periods which each plant can produce multiple products and utilise direct shipments between plants and distribution centres (DC). The model is formulated as mixed integer programming (MIP) with objective function to minimise total costs that consist of setup cost, production cost, inventory cost, and transportation cost. We compare the solution obtained from integrated model with decoupled model to determine the value of coordination. Numerical experiment on 24 test problems showed that the cost reduction obtained from coordination ranged between 0.5%-16.3%. Sensitivity analysis is used to obtain problem parameters that will affect the effectiveness of the integrated model, such as number of plants, number of time periods, and production capacity.

Keywords: supply chain management; SCM; production-distribution coordination; integrated production-inventory-distribution; decoupled modelling; mixed integer programming; direct shipment; two-stage supply chains; production capacity; setup cost; production cost; inventory cost; transportation cost; time periods; number of plants.

DOI: 10.1504/IJBPSCM.2010.034469

International Journal of Business Performance and Supply Chain Modelling, 2010 Vol.2 No.1, pp.45 - 60

Published online: 05 Aug 2010 *

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