4-3A strategic capacity allocation model for a complex supply chain.pdfVIP

ARTICLE IN PRESS Int. J. Production Economics 121 2009 505–518 /locate/ijpe A strategic capacity allocation model for a complex supply chain: Formulation and solution approach comparison Hongyan Li, Linda Hendry, Ruud Teunter Management Science Department, Lancaster University Management School, Lancaster LA1 4YX, UK Received 12 April 2006; accepted 9 February 2007 Available online 24 March 2007 Abstract In this paper, a capacity allocation problem is discussed based on a more complex supply chain than has been typically considered in previous quantitative modelling studies. This study analyses an integrated supply chain operation from raw material purchasing to ?nal product distribution. The aim is to optimize the allocation of capacities among different facilities and product items. In this paper, a mixed integer programming model with dynamic characteristics is presented ?rst, and then alternative solution procedures are introduced. The solution procedures include the development of a decomposition heuristic and an integrated heuristic algorithm. A computation study compares the solution procedures and uses sensitivity analysis to show that the heuristics work well. Thus, by adequately modelling a more realistic sized supply chain problem, this study represents an important advance in supply chain modelling research. r 2007 Elsevier B.V. All rights reserved. Keywords: Supply chain management; Supply chain modelling and optimization; Strategic capacity allocation; Large-scale mixed integer programming; Heuristics 1. Introduction decisions, such as capacity allocation decisions, have a signi?cant impact on supply chain perfor- Quantitative modelling for strategic supply chain mance. Given limited raw material supplies and planning continues to be a fruitful research area. limited capacities for production, ?nal product The purpose of the modelling is usually to prov