Optimal supply chain network design and redesign at minimal total cost and with demand satisfaction

In this paper, we propose a framework for supply chain network design and redesign that allows for the determination of the optimal levels of capacity and operational product flows associated with supply chain activities of manufacturing, storage, and distribution at minimal total cost and subject to the satisfaction of product demands. We formulate both the design and redesign problems as variational inequalities and show that the same algorithm, which exploits the underlying network structure, can be used for the solution of either problem. We illustrate the new framework with numerical examples that demonstrate the practicality and flexibility of the approach.