Optimal production allocation and distribution supply chain networks

Enterprise optimisation can rapidly strip significant “bottom line” costs out of global operations, giving companies a real competitive edge. The benefits of managing supply chain networks by integrating operational, design and financial decisions have been acknowledged by the industrial and academic community. The objective of this work is to determine the optimal configuration of a production and distribution network subject to operational and financial constraints. Operational constraints include quality, production and supply restrictions, and are related to the allocation of the production and the work-load balance. Financial constraints include production costs, transportation costs and duties for the material flowing within the network subject to exchange rates. As a business decision the out-sourcing of production is considered whenever the organisation cannot satisfy the demand. A mixed integer linear programming (MILP) model is proposed to describe the optimisation problem. A case study for the coatings business unit of a global specialty chemicals manufacturer is used to demonstrate the applicability of the approach in a number of scenarios.