A Model Predictive Control framework for robust management of multi-product,multi-echelon demand networks

Model Predictive Control (MPC) is presented as a robust, flexible decision framework for dynamically managing inventories and meeting customer requirements in demand networks (a.k.a. supply chains). As a control-oriented framework, an MPC-based planning scheme has the advantage that it can be tuned to provide acceptable performance in the presence of significant uncertainty, forecast error, and constraints on inventory levels, production and shipping capacity. The translation of the supply chain problem into a formulation amenable to MPC implementation is initially developed for a single-product, two-node example. Insights gained from this problem are used to develop a partially decentralized MPC implementation for a six-node, two-product, three-echelon demand network problem developed by Intel Corporation that consists of interconnected assembly/test, warehouse, and retailer entities. Results demonstrating the effectiveness of this Model Predictive Control solution under conditions of demand forecast error, constraints on capacity, shipping and release, and discrepancies between actual and reported production throughput times (i.e. plant-model mismatch) are presented. The Intel demand network problem is furthermore used to evaluate the relative merits of various information sharing strategies between controllers in the network. Both the two-node and Intel problems show the potential of Model Predictive Control as an integral component of a hierarchical, enterprise-wide planning tool that functions on a real-time basis, supports varying levels of information sharing and centralization/decentralization, and relies on combined feedback–feedforward control action to enhance the performance and robustness of demand networks. These capabilities ultimately mitigate the “bullwhip effect” in the supply chain while reducing safety stocks to profitable levels and improving customer satisfaction.