A coordinated production planning model with capacity expansion for supply chain networks

Abstract

Developing a flexible supply chain is important for enterprises to face market volatility and diversity. In order to satisfy order requirements under demand uncertainty, this study constructs a coordinated production planning model of supply chain networks considering production capacity expansion. Besides, the proposed model involves batch production that is commonly used in many companies. The constructed model is then linearised as a mixed-integer linear programming problem to guarantee global optimality. The solution of the reformulated model determines the optimal production, transportation and inventory levels as well as the optimal batch production operations and capacity expansion strategy. Several numerical experiments are conducted to demonstrate the effectiveness of the proposed method and the impacts of production capacity expansion on the operations of the supply chain. [Received: 27 November 2017; Revised: 13 August 2018; Accepted: 29 December 2018].