Where do you need to allocate your stock to meet customers demand and reduce your transportation costs?
Supply planning is the process of managing the inventory produced by manufacturing to fulfil the requirements created from the demand plan.
Your target is to balance supply and demand in a manner to ensure the best service level at the lowest cost.
In this Article, we will present a simple methodology to use Integer Linear Programming to answer a complex Supply Planning Problem considering:
- Inbound Transportation Costs from the Plants to the Distribution Centers (DC) ($/Carton)
- Outbound Transportation Costs from the DCs to the final customer ($/Carton)
- Customer Demand (Carton)
As a Supply Planning manager of a mid-size manufacturing company, you received the feedback that the distribution costs are too high. Based on the analysis of the Transportation Manager this is mainly due to the stock allocation rules.
In some cases, your customers are not shipped by the closest distribution centre, which impacts your freight costs.
- 2 plants producing products with infinite capacity Note: we’ll see later how we can improve this assumption easily
- 2 distribution centres that receive finished goods from the two plants and deliver them to the final customers Note: we will consider that these warehouses operate X-Docking to avoid considering the concept of stock capacity in our model 200 stores (delivery points)
Which Plant i and Distribution n should I chose to produce and deliver 100 units to Store p at the lowest cost?
This repository code you will find all the code used to explain the concepts presented in the article.
Senior Supply Chain Engineer with an international experience working on Logistics and Transportation operations.
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