Customers Factories

Demand Costs:
Fixed cost
Productive cost
Holding cost
Transportation between
facilities

Constraints:
Productive Capacity
Inventory Capacity
Production Time
Lead time to the
customers

- Objective: Minimize production, inventory, and transportation costs

- Constraints:

1. The demand must be fulfilled.

2. The demand should be fulfilled only from a factory with inventory of that product.
3. The demand should consider lead times for the customers.
4. The production should consider production time.
5. The factories cannot produce more that its capacity.
6. The factories cannot get more inventory that its capacity.
7. The inventory and the produced products produced before should be equal to the
demand, inventory and produced products in the actual period.

- Solution: We will use a Mixed integer linear programming model like Pyomo, Cplex or
Gurobi through a mathematic library in python (like Pyomo for example).
 - Solution Example:
-

We have 3 factories (A, B and C):

 Factory A supply product A and B for customer 1 and 2

 Factory B Supply A and B for customers 2,3, 4 and 5
 Factory C supply product C for customers 1 and 6.

This solution will be done for each period of planning.

Mixed Integer linear model

Sets:

F : Factories
P : Products o services
C : Customers
T : Time (discretized)

Subsets:

OD : Union between Cartesian product of F and F (if only if are distinct), and Cartesian
product of F and C

Parameters:

fc f : Fixed cost of the Factory f

c fp : Cost per unit produced of product p in Factory f
pt fpt : Production time of product p in Factory f in period t
pk pft : Production capacity of factory f to produce product p in period t
p ip : Inventory capacity of the factory f to produce product p
h fp : Holding cost of product p in factory f
t cod : Transportation cost between o and d (factory to customer, factory to factory ..)
l icf : Lead time to customer c from factory f of the product p
d cpt : Demand of customer c for the product p in period t

Decision variables:

Xf :
{1:if the0 :otherwise
factory f isused

Y fpt : Quantity produced of product p in the factory f in period t

I fpt : Inventory of product p in the factory f in period t
F odpt : Quantity of product p shipped from o to d in period t
Objective:

Minimize A+ B+C + D (1)

Where:

∑ f cf X f = A This term refers to the cost of use the factory for all
f ∈F the pacificated time

∑ c fp Y fpt = B This term refers to the productive cost in each period T

p ∈P ,f ∈ F ,t ∈T

∑ t c od F ofpt = C This term refers to transportation cost in each period T

p ∈P ,f ∈ F ,(o , d )∈OD ,t ∈T

∑ h fp I fpt = D This term refers to holding cost in each period T

p ∈P ,f ∈F ,t ∈T

s.t.

Constraint detailed before