A Multi Period Stochastic Model to Link the Supply Chain with the Production Plan in a Manufacturing Organization.

Abstract

In this document we considered a model for short term production planning in a market of consumer goods. The model assumes a variable number of manufacturing plants, distribution centers, retailers, and the corresponding supply chain of the system. These bring a range of varied products to meet a random demand on a weekly basis. Each source has its own manufacturing costs, production capacities and delivery commitments to the retailers. We develop a strategy for building a global production plan that meets a certain level of customer service. Our proposal is based on a mixed integer linear programming model with a stochastic approach that meets weekly demand requirements at minimum cost, subject to the requirements of inventory, production capacity and delivery capabilities of the supply chain. The objective function includes fixed and variable costs of production generated in the manufacturer plants, costs of sending materials, and inventory holding costs. To optimize the model we use a commercial software and then, we explore the probability distribution associated with the cost function. We illustrate our proposal with a numerical example reporting the theoretical and practical results.