A hierarchical approach to optimal production, inventory, and distribution planning for a manufacturing company
DOI:
https://doi.org/10.24215/15146774e075Keywords:
production inventory routing problem, optimization, milp, backorderAbstract
In recent years, the coordination of production, inventory, and prod-uct distribution activities has become essential to meet market demands at the lowest possible cost. The problem known in the literature as the Production-Inventory-Routing Problem (PIRP) is addressed in this work through a mixed-integer linear programming (MILP) approach. The challenge of these models lies in answering questions such as what, when, and how much to produce, how much to store at the facility, and how to distribute the various products of the company to different customers in a way that demand is met at minimum costs across the entire supply chain. Taking into account the combinatorial complexi-ty of the decisions involved, a hierarchical solution based on MILP-models is proposed: first, production, inventory, and product delivery is determined, and then routing is solved, in order to achieve results close to optimal within a rea-sonable computation time. The proposed approach is applied to a manufacturing industry in the Santa Fe province, in order to support the company's decision making related to achieving the minimum cost in the tasks mentioned for a weekly horizon.
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