An integrated approach for production and distribution planning in supply chain management

Abstract

Many firms have been trying to optimize their production and distribution systems separately, but using this approach limits any possible increase in profit. Thus, it is becoming more important to analyse these two systems simultaneously. This paper presents the solutions for integrated production and distribution planning and investigates the effectiveness of their integration through a computational study, in a multi-plant, multi-retailer, multi-item, and multi-period logistic environment where the objective is to maximize the total net profit. Computational results on test problems using the proposed heuristic confirm the substantial advantage of the integrated planning approach over the decoupled one. Sensitivity analysis on the input parameters indicates that, under the right conditions, the effectiveness of integrating production and distribution functions can be extremely high.