A Model for Production-distribution Planning in Three-stage Supply Chains

We develop a mixed-integer linear programming model for designing three-stage supply chain (SC) networks. The model determines the optimal quantity of each product to be produced at each plant in each period, subcontracted at each distribution centre (DC), transported from each plant to each DC and from each DC to each retailer in each period, and kept in inventory in each plant and in each DC in each period. It also determines the optimal amount of extensions needed at each DC in each period. Numerical examples given to test and illustrate the model show that it works very well. The examples also show that each of the model’s key components is critical to the model’s performance.