Taking market forces into account in the design of production-distribution networks

A. Martel¹, D. Vila^1,2 and R. Beauregard¹

(1) Université Laval, Centre de recherche sur les technologies de l’organisation réseau (CENTOR), Consortium de Recherche FOR@C, Sainte-Foy, Québec, G1K7P4, Canada.

(2) École Nationale Supérieure des Mines de Saint-Étienne, Centre G2I, 158 cours Fauriel, 42023 Saint-Étienne cedex 2, France.

alain.martel@centor.ulaval.ca

This paper presents a generic approach to take into account market opportunities when designing production-distribution networks. Three types of sub-markets found in several industrial contexts are analysed: spot markets, contracts and Vendor Managed Inventory (VMI) agreements. For contracts and VMI agreements, customer preferences with respect to different logistics policies are captured. A price-supply function is proposed to model the spot market behaviour. The deployment of the production-distribution network is formulated as a two-stage stochastic mathematical program. Finally, a sample average approximation method (SAA), based on Monte Carlo sampling techniques, is proposed to solve the model.

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