Assessing the Benefits of Production-distribution Coordination in an Industrial Gases Supply Chain

In this paper, we propose a multi-period MILP model for optimal enterprise-level planning of industrial gas operations with an objective to minimize the total cost of production and distribution. As compared to the fully sequential approach for optimizing production and then optimizing distribution, the proposed fully coordinated model simultaneously considers various trade-offs between production and distribution activities and yields optimal operational decisions for the supply chain as a whole. Through the continuum between fully sequential and fully coordinated approaches, different levels of coordination are investigated. The computational results for small instances show potential savings if a fully coordinated approach is implemented in place of a fully sequential one. This can be attributed to the improved coordination of the production schedule with the product deliveries.