Multiechelon supply chain planning with sequence-dependent changeovers and price elasticity of demand under uncertainty

Authors

  • Songsong Liu,

    1. Centre for Process Systems Engineering, Dept. of Chemical Engineering, University College London, Torrington Place, London WC1E 7JE, U.K.
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  • Nilay Shah,

    1. Centre for Process Systems Engineering, Imperial College London, London SW7 2AZ, U.K.
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  • Lazaros G. Papageorgiou

    Corresponding author
    1. Centre for Process Systems Engineering, Dept. of Chemical Engineering, University College London, Torrington Place, London WC1E 7JE, U.K.
    • Centre for Process Systems Engineering, Dept. of Chemical Engineering, University College London, Torrington Place, London WC1E 7JE, U.K.
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Abstract

An optimization framework is proposed for a multiechelon multiproduct process supply chain planning under demand uncertainty considering inventory deviation and price fluctuation. In this problem, the sequence-dependent changeovers occur at the production plants, and price elasticity of demand is considered at the markets. Based on the classic formulation of travelling salesman problem (TSP), a mixed-integer liner programming (MILP) is developed, whose objective function considers the profit, inventory deviations from the desired trajectories and price changes simultaneously. Model predictive control (MPC) approach is adopted to tackle the uncertain issues, as well as the inventory and price maintenance. The applicability of the proposed model and approach was illustrated by solving a supply chain example. Some issues, including length of the control horizon, price elasticity of demand, weights, inventory trajectories, and changeovers, are discussed based on the computational results. © 2012 American Institute of Chemical Engineers AIChE J, 2012

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