Production, distribution, and capacity planning for an integrated buyer-vendor system incorporating different production and shipping scenarios

Supply chain management generally seeks to reduce costs, improve customer satisfaction, and gain a competitive advantage for all members of the chain. If decisions are made independently, there can be no guarantee that network members will reach the optimal decision as a whole. In integrated buyer-vendor optimization models, decisions are made centrally, and different parts are integrated and coordinated. This paper examines two different scenarios, namely Continuous Production-Instantaneous Shipping and Continuous Production-Gradual Shipping. In each scenario, an integrated inventory model with multiple warehouse capacity levels is proposed under uncertain conditions. We solved both mathematical models using proposed exact algorithm. Based on the calculated results, capacity planning leads to proper inventory management, efficient use of space, and making the most appropriate decision to have the least chain cost. Furthermore, the outputs of the models show that limited access to transport fleet leads to an increase in inventories and the subsequent reduction of stock-out effects requires effective changes in plans and management measures.

Automated summary

This paper examines two different scenarios of supply chain management under uncertain conditions, focusing on centralized decision-making and integrated coordination. The study shows that capacity planning plays a critical role in inventory management and cost reduction, while limited access to transport fleet requires effective planning and management measures to mitigate stock-out effects.