Aggregate procurement, production, and shipment planning decision problem for a three-echelon supply chain using swarm-based heuristics

Abstract

Supplier selection is deemed as a crucial strategic decision-making activity in building a competitive edge. Firms prefer to operate with a few trusted suppliers, selected from a bigger pool of vendors. The chosen suppliers are the ones whose commitments are best oriented in realising the business goals of the company. At the same time enterprise targets cannot be achieved in the absence of cost-effective inventory management policies. This has created the inevitable need for aggregate production and distribution planning. Even more competitive strategy would be integrating procurement planning with production-distribution scheduling. We address the problem of integrated procurement, production and shipment planning for a supply chain, spanning over three echelons. Supplier order scheduling is combined with a production-shipment planning process to realise a minimum cost operations policy. Two recently developed swarm heuristics are employed to search for the near optimal solution of the mathematical model, which is developed to capture the aggregate planning problem.