An integrated approach to supply chain network design with service level consideration

The problem of designing the supply chain network regarding the customer satisfaction factors, rather than just traditional cost based approaches, has become a really valuable problem for many firms. In this paper we consider a supply chain network design which optimizes the performance of supply chain subject to a required service level. In this paper, the supply chain network includes plant, W/D (Warehouse/Distribution) centers and customers, i.e., we consider a tree echelon supply chain. In this research , for the first time in the literature the design decisions include the followings in an integrated SCN design : 1) deciding the minimum number and locations of W/D centers respecting a required service level, 2) deciding the demand of product at the plant to supply all the W/D centers and demanders needs with a certain service level, 3) optimal delivery routes from each W/D to related customers and 4) optimal routes from factory to W/D centers and/or vice versa, which include the simultaneous pick up and delivery demands of each W/D center, regarding the fact that according to the famous SCOR model some W/D centers may have also return demands. To deal with the problem, first, we formulated this problem using stochastic set-covering problem to determine the minimum number of W/D centers among a discrete set of location sites so that the probability of each customer to be covered is not less than a critical service level. This stochastic set-covering problem will be solved by the use of 0–1 programming method. Then, to deal with delivery problem from W/D centers to customers, we formulate a vehicle routing problem (VRP) using an improved genetic algorithm on three-step approaches including: (1) clustering module which converges multi-supply center problem into single supply center problems, (2) improved vehicle routing, VRP module, and (3) GA-TSP module to find the routes for delivering goods from W/D centers to customers. Then, for the first time in literature, also we will use a Vehicle Routing Problem with Simultaneous Pickup and Delivery (VRPSPD) for delivering goods to W/D centers and/or to pickup some goods that should be returned to plant in a simultaneous procedure.

Keywords:

Supply chain network design , Logistics system design , Stochastic setcovering problem , Vehicle routing problem , Vehicle routing problem with simultaneous pickup and delivery , Genetic algorithm , Integer programming