An outer approximation method for an integration of supply chain network designing and assembly line balancing under uncertainty

•We proposed a new model for the integration of supply chain network designing problem and assembly line balancing.•The new problem considers location and capacity decisions for the manufacturers and assemblers.•We developed an efficient outer approximation method to solve the problem.•We examined the performance of the proposed OA in comparison with the standard model.•The proposed OA method performs better than the standard model.

In this paper a new model is proposed for the integrated problem of supply chain network designing and assembly line balancing under demand uncertainty. In this problem there are three types of entities: manufacturers, assemblers and customers. Manufacturers provide assemblers with components and assemblers use these components to produce the final products and satisfy the demand of the customers. This problem involves determining the location of manufacturers and assemblers in the network, balancing the assembly lines, and transportation of materials and products throughout the network. A mixed integer nonlinear programming formulation based on two stage stochastic programming method is developed to solve this problem to optimality. Moreover, an outer approximation (OA) method is proposed to efficiently solve this problem. The computational results show efficiency of the proposed OA method.