Multi-criteria mathematical model for designing the distribution network of a consumer goods company |
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| Authors: | Aixa Cintron A. Ravi Ravindran Jose A. Ventura |
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| Affiliation: | 1. Department of Industrial Engineering, Faculty of Engineering, Kharazmi University, Theran, Iran;2. Department of Industrial Engineering, Sharif University of Technology, Tehran, Iran;1. School of Economics and Management, Chongqing Jiaotong University, Chongqing 400074, China;2. School of Management and Economics, University of Electronic Science and Technology, Chengdu 610054, China;3. Department of Civil and Environmental Engineering, University of Washington, Seattle, WA 98195-2700, USA;4. School of Transportation Science and Engineering, Beijing Key Laboratory for Cooperative Vehicle Infrastructure, Systems, and Safety Control, Beihang University, Beijing 100191, China;1. Institute for Research in Technology, Comillas Pontifical University, Madrid 28015, Spain;2. Electrical and Control Department, College of Engineering and Technology, Arab Academy for Science, Technology and Maritime Transport, P.O. Box 2033, Cairo, Egypt;1. School of Traffic and Transportation, Beijing Jiaotong University, Beijing 100044, China;2. School of Mathematics & Information Science, Henan Polytechnic University, Jiaozuo 454000, China;3. Department of Civil and Environmental Engineering, The Hong Kong Polytechnic University, Kowloon, Hong Kong, China |
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| Abstract: | This paper describes a multiple criteria mixed-integer linear program used for designing the best possible supply chain distribution network for a consumer goods company. The model determines the optimal configuration of the manufacturing plants, distributors and customers in the distribution network. The model is intended for making tactical decisions for designing distribution networks, or more specifically, for designing the flow of products from the manufacturing plants to the customers. The customers have four options for receiving products in this model. Products can be supplied from (1) the regional distribution center (DC), (2) the manufacturing plant, (3) an independent distributor who is supplied from the regional DC, or (4) an independent distributor who is supplied directly from a manufacturing plant. The model selects the best option for each customer/distributor based on several criteria: profit, lead time, power, credit performance, and distributors’ reputation. The model is validated with real data from a consumer goods company to show its functionality. To account for variability in demand, the model is run under multiple scenarios and the results are analyzed to obtain the best solution. The company uses two DC’s located in the same region, but the model assumes only one regional DC with infinite capacity. With the proposed network, we show that one of the regional DC’s could be eliminated and distribution costs would be reduced from 12% to 3% of the Net Sales (approximately a monthly reduction of $574,000 in distribution expenses). |
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