(385a) Operational Planning of a Multisite Production and Distribution Network Under Uncertainty

The operational planning of a multisite production and distribution network entails determining the daily production profile of each facility within the supply chain, as well as coordinating the shipment of final product from the various production facilities to the multiple customer distribution centers over a time horizon of several months. The inherent complexities of concurrently simulating production tasks at each facility and the interplay between several production and distribution centers make operational planning of a multisite production and distribution network prohibitive. Shah [1], Kallrath [2], and Kreipel and Pinedo [3] all provide excellent reviews of the various issues related to operational planning. Due to the length of the time horizon, it is advantageous for a multisite operational planning model to take into account the uncertainty associated with important system parameters. Specifically, demand and transportation time uncertainty should be explicitly taken into account within a multisite operational planning model so as to eliminate excess inventory and maximize customer satisfaction levels.

In order to address supply chain uncertainty at the operational planning level, the Multisite Operational Planning with Production Disaggregation Model (Multisite-PPDM) developed by Verderame and Floudas [4] has been extended to take into account demand and transportation time uncertainty. The robust optimization framework developed by Lin et al. [5] and Janak et al. [6] along with Conditional Value-at-Risk theory presented by Rockafellar and Uryasev [7] have been adapted and applied so as to address the multiple forms of planning uncertainty within the Multisite-PPDM. In order to validate the proposed approach, the extended Multisite-PPDM has been applied to a supply chain consisting of three multipurpose and multiproduct batch plants and three distribution centers. Sixty-three different products are considered over a three month time horizon, and the results indicate that the novel multisite operational planning model is capable of taking into account planning level demand and transportation time uncertainty in a computationally tractable way.

[1] Shah, N. Process Industry Supply Chains: Advances and Challenges. Computers and Chemical Engineering. 2005, 29, 1225.

[2] Kallrath, J. Planning and Scheduling in the Process Industry. OR Spectrum. 2002, 24, 219.

[3] Kreipl, S.; Pinedo, M. Planning and Scheduling in Supply Chains: An Overview of Issues in Practice. Production and Operations Management. 2004, 13, 77.

[4] Verderame, P.M.; Floudas, C.A. Operational planning framework for multisite production and distribution networks. Computers and Chemical Engineering. 2009, 33, 1036.

[5] Lin, X.; Janak, S.L.; Floudas, C.A. A new robust optimization approach for scheduling under uncertainty: I. Bounded uncertainty. Computers and Chemical Engineering. 2004, 28, 1069.

[6] Janak, S.L.; Lin, X.; Floudas, C.A. A new robust optimization approach for scheduling under uncertainty: II. Uncertainty with known probability distribution. Computers and Chemical Engineering. 2007, 31, 171.

[7] Rockafellar, R.; Uryasev, S. Optimization of Conditional Value-at-Risk. Journal of Risk. 2000, 2, 21.