Optimizing the supply chain configuration for make-to-order manufacturing

We consider a make-to-order (MTO) manufacturer who has won multiple contracts with specified quantities to be delivered by certain due dates. Before production starts, the company must configure its supply chain and make sourcing decisions. It also needs to plan the starting time for each production task under limited availability of resources such as machines and workforce. We develop a model for simultaneously optimizing such sourcing and planning decisions while exploiting their tradeoffs. The resulting multi-mode resource-constrained project scheduling problem (MMRCPSP) with a nonlinear objective function is NP-complete. To efficiently solve it, a hybrid Benders decomposition (HBD) algorithm combining the strengths of both mathematical programming and constraint programming is developed. The HBD exploits the structure of the model formulation and decomposes it into a relaxed master problem handled by mixed-integer nonlinear programming (MINLP), and a scheduling feasibility sub-problem handled by constraint programming (CP). Cuts are iteratively generated by solving the feasibility sub-problem and added back to the relaxed master problem, until an optimal solution is found or infeasibility is proved. Computational experiments are conducted to examine performance of the model and algorithm. Insights about optimal configuration of MTO supply chains are drawn and discussed.

► A new modeling approach to simultaneously optimize sourcing and planning decisions in a make-to-order (MTO) supply chain.
► A hybrid algorithm to combine the complementary strengths of both math programming and constraint programming.
► Managerial insights on optimal MTO supply chain configuration.