Simultaneous product family and supply chain design: An optimization approach

This paper deals with the difficult problem of joint product family and supply chain design. We present a general model that simultaneously considers the construction of the bill of materials and the design of the supply chain network. For the bill of materials, product, sub-assembly and component substitution possibilities are considered. For the supply chain network, facility and distribution center location are considered as well as the choice of suppliers. A Mixed Integer Linear Program (MILP) model is proposed. The MILP formulation is solved optimally for medium-sized instances. For larger instances, two heuristics derived from the MILP are designed. These methods are computationally tested on various instances from a generator conceived for this purpose. The modelling of product substitution possibilities through product transformation permits the solving of large size instances that are now adequate for real problems.