Tradeoff analysis for an integrated transportation and inventory distribution network using mixed integer linear programming

Abstract

[ACCESS RESTRICTED TO THE UNIVERSITY OF MISSOURI AT REQUEST OF AUTHOR.] One of the distribution network problems faced by industrial organizations today is coordinating the movement of goods on a global scale. The flow of goods from one geographically dispersed location to another requires a great deal of management. An integrated decision making approach that considers the overall criteria is essential to small and medium enterprises (SMEs) due to its financial and headcount limitation. As transportation and inventory are the two major cost components in supply chain, better balancing between these two elements in the enterprise will enable higher customer satisfaction, with greater efficiency in terms of time and resources. An integrated mixed integer linear programming model is developed in order to plan the inventory quantity required when utilizing various transportation modes for international and domestic distribution, from plants to distribution centers and then to customers. The model considers transportation costs, inventory stocks and customer satisfaction so that the overall performance of the supply chain is assessed strategically. The model is solved using the GUROBI-AMPL solver and enables decision makers to conduct a first cut evaluation so that the enterprise has a competitive advantage. A case study is carried out for a high-tech SME company for validation and sensitivity analysis of the model.