4. Logistics network planning.
A supply chain is a set of facilities, supplies, customers, products and methods of
controlling inventory, purchasing, and distribution. The chain links suppliers and customers,
beginning with the production of raw material by a supplier, and ending with the consumption of
a product by the customer. In a supply chain, the flow of goods between a supplier and customer
passes through several stages, and each stage may consist of many facilities. In recent years, the
supply chain network (SCN) design problem has been gaining importance due to increasing
competitiveness introduced by market globalization. Firms are obliged to maintain high
customer service levels while at the same time they are forced to reduce cost and maintain profit
margins. Traditionally, marketing, distribution, planning, manufacturing, and purchasing
organizations along the supply chain operated independently. These organizations have their
own objectives and these are often conflicting. But, there is a need for a mechanism through
which these different functions can be integrated together. Supply chain management (SCM) is a
strategy through which such integration can be achieved.
The logistics network design is one of the most comprehensive strategic decision
problems that need to be optimized for long-term efficient operation of whole supply chain. It
determines the number, location, capacity and type of plants, warehouses and distribution centers
(DCs) to be used. It also establishes distribution channels, and the amount of materials and items
to consume, produce and ship from suppliers to customers. The logistics network models cover a
wide range of formulations ranging from simple single product type to complex multi-product
ones, and from linear deterministic models to complex non-linear stochastic ones. In the
literature there are different studies dealing with the design problem of logistics networks and
these studies have been surveyed.
An important component in logistics network design and analysis is the establishment of
appropriate performance measures. A performance measure, or a set of performance measures, is
used to determine efficiency and/or effectiveness of an existing system, to compare alternative
systems, and to design proposed systems. These measures are categorized as qualitative and
quantitative. Customer satisfaction, flexibility and effective risk management belong to
qualitative performance measures. Quantitative performance measures are also categorized by
(1) objectives that are based directly on cost or profit such as cost minimization, sales
maximization, profit maximization, etc. and (2) objectives that are based on some measure of
customer responsiveness such as fill rate maximization, customer response time minimization,
lead time minimization, etc. In traditional logistics system, the focus of the integration of
logistics system is usually on a single objective such as minimum cost or maximum profit.
However, there are no design tasks that are single objective problems. The design/
planning/scheduling projects usually involve trade-offs among different incompatible goals.
Recently, multi-objective optimization of logistics has been considered by different researchers
in literature. The authors have developed an integrated multi-objective supply chain model for
strategic and operational supply chain planning under uncertainties of product, delivery and
demand. While cost, fill rates, and flexibility were considered as objectives, and constraint
methods had been used as a solution methodology. A multi-objective genetic optimization
procedure for the order distribution problem in a demand driven logistics has also been proposed.
They considered minimization of total cost of the system, total delivery days and the equity of
the capacity utilization ratio for manufacturers as objectives. The researchers have developed a
multi-product, multi-stage, and multi-period scheduling model for a multi-stage logistics with
uncertain demands and product prices.
As objectives, fair profit distribution among all participants, safe inventory levels and
maximum customer service levels, and robustness of decision to uncertain demands have been
considered, and a two-phased fuzzy decision-making method was proposed to solve the problem.
The researchers have proposed a model that assigning suppliers to warehouses and
warehouses to customers. They used a multi objective optimization modeling framework for
minimizing cost and maximizing customer satisfaction. The researchers have formulated the
logistics network model as a multi-objective stochastic mixed integer linear programming model,
which was solved by e-constraint method, and branch and bound techniques. Objectives were SC
profit over the time horizon and customer satisfaction level. The researchers have developed a
hybrid approach based on a genetic algorithm and Analytic Hierarch Process (AHP) for
production and distribution problems in multi-factory supply chain models.
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