A Time-Evolving Optimization Model for an Intermodal Distribution Supply Chain Network:!A Case Study at a Healthcare Company

University essay from Umeå universitet/Institutionen för matematik och matematisk statistik; Umeå universitet/Institutionen för matematik och matematisk statistik


Enticed by the promise of larger sales and better access to customers, consumer goods compa- nies (CGCs) are increasingly looking to evade traditional retailers and reach their customers directly–with direct-to-customer (DTC) policy. DTC trend has emerged to have major im- pact on logistics operations and distribution channels. It oers significant opportunities for CGCs and wholesale brands to better control their supply chain network by circumventing the middlemen or retailers. However, to do so, CGCs may need to develop their omni-channel strategies and fortify their supply chains parameters, such as fulfillment, inventory flow, and goods distribution. This may give rise to changes in the supply chain network at all strategic, tactical and operational levels.

Motivated by recent interests in DTC trend, this master thesis considers the time-evolving supply chain system of an international healthcare company with preordained configuration. The input is bottleneck part of the company’s distribution network and involves 20% ≠ 25% of its total market. A mixed-integer linear programming (MILP) multiperiod optimization model is developed aiming to make tactical decisions for designing the distribution network, or more specifically, for determining the best strategy for distributing the products from manufacturing plant to primary distribution center and/or regional distribution centers and from them to customers. The company has got one manufacturing site (Mfg), one primary distribution center (PDP) and three dierent regional distribution centers (RDPs) worldwide, and the customers can be supplied from dierent plants with various transportation modes on dierent costs and lead times. The company’s motivation is to investigate the possibility of reduction in distribution costs by in-time supplying most of their demand directly from the plants. The model selects the best option for each customer by making trade-os among criteria involving distribution costs and lead times. Due to the seasonal variability and to account the market fluctuability, the model considers the full time horizon of one year.

The model is analyzed and developed step by step, and its functionality is demonstrated by conducting experiments on the distribution network from our case study. In addition, the case study distribution network topology is utilized to create random instances with random parameters and the model is also evaluated on these instances. The computational experiments on instances show that the model finds good quality solutions, and demonstrate that significant cost reduction and modality improvement can be achieved in the distribution network. Using one-year actual data, it has been shown that the ratio of direct shipments could substantially improve. However, there may be many factors that can impact the results, such as short-term decisions at operational level (like scheduling) as well as demand fluctuability, taxes, business rules etc. Based on the results and managerial considerations, some possible extensions and final recommendations for distribution chain are oered.

Furthermore, an extensive sensitivity analysis is conducted to show the eect of the model’s parameters on its performance. The sensitivity analysis employs a set of data from our case study and randomly generated data to highlight certain features of the model and provide some insights regarding its behaviour. 

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