Supply Chain Network Optimization In Business-to-Business E-Commerce

Abstract To achieve high efficiency in supply chain network, an orderly and flexible flow of materials is essential. In this paper we develop a practical mixed integer programming model for a supply chain network design problem where the objective is to minimize the total production, transportation and distribution costs and the fixed costs for opening warehouses. We employ Lagrangian relaxation to the model and also present several solution procedures to find the lower bound and the best upper bound of the objective function. These procedures are coded as integral parts of a subgradient optimization algorithm. Computational results are reported and show that the algorithm behaves very well in large-scale supply chain network design problems.