A two-stage procedure for efficiently solving the integrated problem of production, inventory, and distribution of industrial products

Abstract

This paper deals with the problem of optimally planning the production, inventory and distribution of products transported via multi-compartment vehicles. It assumes that facilities in the distribution network have preservation-storing devices to inventory products on-site. Production activities may be performed on any time period of the planning horizon. Due to problem complexity, a two-stage solution strategy that first generates a set of multi-period distribution routes through a column generation approach is proposed. The routes are used for feeding the MILP formulation of the problem. Several valid inequalities are proposed for expediting the MILP resolution. The aim is to maximize the profit obtained by the company that fabricates and distributes the products. This profit is computed as the total income from sales minus the sum of all costs incurred along the planning horizon. The effectiveness of the two-stage solution strategy is tested on an extensive set of realistic instances.