Supply Chain Network Design with
Response Time
Consideration: Models and Solution
Methods
Navneet Vidyarthi, Samir Elhedhli, & Elizabeth Jewkes
Department of Management Sciences
{nkvidyar,
elhedhli, emjewkes}@uwaterloo.ca
Make-to-order
and assemble-to-order systems are important business models in managing a wide
ranging class of responsive supply chains, characterized by highly uncertain customer
demand, high product variety, and short product life cycle. Motivated by the
strategic importance of response time/lead time reduction in supply chain
management, the primary focus of the proposed research is to develop models for
designing make-to-order and assemble-to-order supply chains. We consider a
two-echelon make-to-order supply chain design model characterized by stochastic
customer demand that has to be satisfied from a set of distribution centers (DCs), where sufficient production/assembly capacity has to
be acquired in order to avoid long response time. The objective is to
simultaneously determine the DC locations, capacity levels at DCs, and the assignment of customers to DCs
by minimizing response time costs in addition to the variable transportation
cost, fixed cost of opening DCs, and capacity
acquisition costs at DCs. The DCs are modelled as spatially distributed M/G/1 queue. The model is
formulated as a non-linear mixed integer programming (MIP) problem. The model
exhibits nonlinearity because of the integration of response time in optimizing
network design. We propose a linearization based on a simple transformation and
piece-wise linear and concave approximations. We present an exact solution
method based on cutting plane approach which is amenable to state-of-the-art IP
solvers. Preliminary computational results demonstrate that the cutting plane
approach provides the optimal solution in few iterations…