Optimal configuration of cluster supply chains with augmented Lagrange coordination

• A distributed CSCC model enabling coupled decision mechanism is built with ALC formulation.
• A systematic ALC approach comprising analysis, model, and solution techniques is proposed.
• A generic ALC solution framework and procedure is proposed toward CSCC problems.
• An experiment and sensitivity analysis are provided to show effectiveness of using ALC for resolving a CSCC problem.

Enterprises in an industrial cluster could dynamically alliance in the form of cluster supply chains to share inner-cluster resources and services, and respond to the ever-fluctuating customer demands in a cost-effective way. However, an effective and feasible method enabling such dynamic cluster supply chain configuration (CSCC) lags behind practice due to the conflict of interests. Researchers are designing All-in-One theoretic models to optimize CSCC with the assumed decision details of all enterprises, while in fact clustered enterprises are seeking effective decentralized decision mechanisms which protect their decision autonomy in the frequently re-configured CSC. A newly emerged multi-disciplinary optimization method, Augmented Lagrangian Coordination (ALC), which supports the open-structure collaboration with strict optimization convergence, is thoroughly investigated in this paper and applied to solve the conflict. Through a complete analysis of CSC’s configuration policies in typical stages, a generic CSCC model is proposed and then partitioned into an ALC-based decentralized decision model by the typical decision autonomy distribution in clusters. Clustered enterprises collaborate vertically and laterally along the ALC model through multi-dimensional couplings to achieve the overall consistency and optimality. Results have proved the effectiveness of ALC for CSCC problem. A set of sensitivity analysis is also conducted to find out the condition in which an order has to be fulfilled in a CSC and the most appropriate configuration.