Integrated Production and Distribution Planning: An Improved Formulation and the Value of Integrated Planning

This study considers a supply chain management problem in which a plant produces and distributes a product to multiple retailers using a homogeneous fleet of vehicles over a finite time horizon. The aim is to decide on the production quantities at the plant, delivery quantities to retailers, the set of vehicles to use and the assignment of retailers to vehicles in each period such that the system-wide costs are minimized. A mixed integer linear programming formulation of the problem outperforming the existing ones in the literature is proposed. This study also compares integrated production and distribution planning with the sequential planning in which retailers place their own orders and the plant makes its plan based on these orders, and assesses the value of integrated planning. The computational results indicate that average cost savings of 8.9% and maximum cost savings of 28% can be obtained with the integrated planning over the sequential planning