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Decision Policies for Production Networks pp 265–287Cite as

Optimal Order and Distribution Strategies in Production Networks

Abstract

Production networks are usually defined as a set of processes utilized to efficiently integrate suppliers, manufacturers, and customers so that goods are produced and distributed in the right quantities, to the right locations, and at the right time and in order to reduce costs while satisfying delivery conditions. We focus on a network of suppliers or producers which order goods from each other, process a product according to orders, and receive payments according to a pricing strategy. Modeling manufacturing systems is characterized by many different scales and several different mathematical approaches. We follow a dynamic approach: we are interested in the time behavior of the entire system. Therefore we introduce a coupled system of ordinary differential delay equations, where time-dependent distribution and order strategies of individual manufacturers influence the flow of goods and the total revenue. We also allow manufacturers to face bankruptcy. All order and distribution strategies are degrees of freedom which can vary in time. We determine them as solution to an optimization problem where additionally economic factors such as production and inventory costs and credit limits influence the maximization of profit. Instead of using a simulation-based optimization procedure, we derive an efficient way to transform the original model into a mixed-integer programing problem.

Keywords

  • Production Line
  • Lead Time
  • Node Number
  • Inventory Level
  • Discrete Event Simulation

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Acknowledgments

This work has been supported by DFG grant HE5386/6-1, DAAD 50756459 and 50727872.

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Authors and Affiliations

  1. School of Business Informatics and Mathematics, University of Mannheim, 68131, Mannheim, Germany

    Simone Göttlich

  2. Department of Mathematics, RWTH Aachen University, Templergraben 55, 52056, Aachen, Germany

    Michael Herty

  3. School of Mathematical and Statistical Sciences, Arizona State University, Tempe, AZ, 85287-1804, USA

    Christian Ringhofer

Authors
  1. Simone Göttlich
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  2. Michael Herty
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  3. Christian Ringhofer
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Corresponding authors

Correspondence to Simone Göttlich or Michael Herty .

Editor information

Editors and Affiliations

  1. Dept. Mathematics, Arizona State University, Tempe, 85287-1804, Arizona, USA

    Dieter Armbruster

  2. Decision Technologies, Intel Corporation, W. Chandler Blvd. 5000, Chandler, 85226, Arizona, USA

    Karl G. Kempf

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Göttlich, S., Herty, M., Ringhofer, C. (2012). Optimal Order and Distribution Strategies in Production Networks. In: Armbruster, D., Kempf, K. (eds) Decision Policies for Production Networks. Springer, London. https://doi.org/10.1007/978-0-85729-644-3_11

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