Optimization modeling of an integrated supply chain network

In this paper, we develop a novel multi-echelon joint inventory-location problem that considers location and inventory decisions simultaneously. The model deals with the distribution of a single commodity from a single manufacturer to a set of retailers through a set of sites where distribution centers can be located. The retailers face deterministic demand and hold working inventory. We assume single sourcing in which the entire demand of a given retailer is served by a single distribution center. The distribution centers order a single commodity from the manufacturer at regular intervals and distribute the product to the retailers. The distribution centers, also, hold working inventory representing product that has been ordered from the manufacturer but has not been yet requested by any of the retailers. Lateral supplies among the distribution centers are not allowed. The problem is formulated as a nonlinear mixed-integer program. Model validation and benefit of integration are demonstrated via a numerical study.