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A MULTI-OBJECTIVE OPTIMIZATION

FOR GREEN SUPPLY

CHAIN NETWORK DESIGN

Reviewed

by

DANANG KISWORO / 10074073

Introduction

Operations in supply chain and logistics are part of today’s most important economic activities as they

remain to competitive.

be vital

tools for businesses to remain

Transportation activities are significant sources of air

pollution and greenhouse gas emissions, with the former known to have harmful effects on human health and the latter responsible for global warming.

The researcher are motivated to study a “green” supply chain network design problem where an initial

investment on environmental protection equipment or techniques should be determined in the design

phase. This investment can influence the environmental indicators in operations phase.

Literature Review

According to the most recent comprehensive review on GrSCM by Srivastava (2007), two types of “greenness” are considered by researchers: green design for products (Kuo et al. 2001) and green operations.

The supply chain network design problem is usually modeled as a single objective problem (Melkote and Daskin (2001) and Santoso et al. (2005)).

Multi-objective optimization is a widely used in variety of areas (Sabri and Beamon, 2000; MaxShen et al. 2005;

Hu

et

al. 2009; Koksalan and Tuncer, 2009;

al. 2009). and

is also used

to embed into

Ou Yang

et

a multitude

of decision support system (Despotis and Derpanis

2008; Gao et al. 2009; Stummer

et

al. 2009).

Methodology

(1/7)

1. Problem Definition

Supply Chain Network G =(N,A)

N

is the set of Nodes

A is the set of Arcs N composed by the set of Suppliers S, facilities F and customer C

N = S ᵁ F ᵁ C

When given demand forecasting, we not only aim to choose the potential suppliers from suppliers set and decide which facility to open and finally consider how to distribute the product, but also consider the CO2 emission in each process of the whole network.

Methodology

(2/7)

2. Modeling

Parameter :

Parameter :

Parameter :

Parameter :

Setup Cost for Facility j

Methodology ( 2 /7) 2. Modeling Parameter : Parameter : Parameter : Parameter : Setup Cost

Decision Variable : Decision Variable :

Decision Variable :

Environmental Investment in Facility j Handling cost for product p in facility j

Transport cost for product p from facility i to j

Decision Variable :

1, if facility j is open

the environment protection level in facility j

flow of product p from node i to node j

flow of product p from node i to node j

Total Cost =

Fixed Setup

Cost

+

Environmental

Protection

+

Investment

Total

Transportation

Cost

+

Handling

Cost

Parameter :

Parameter :

CO2 emission in facility j for handling product p

Methodology ( 2 /7) 2. Modeling Parameter : Parameter : Parameter : Parameter : Setup Cost

Decision Variable :

Environmental Investment in Facility j

Decision Variable :

Total CO2

Emission =

flow of product p from node i to node j

the environment protection level in facility j

CO2 Emission in all Facilities

+

CO2 Emission from Supplier to facility and how to

transport it

Methodology

(3/7)

  • 2. Solving Approach

Parameter :

Parameter :

Parameter :

Transport cost for product p from facility i to j Setup Cost for Facility j Handling
Transport cost for product p from facility i to j
Setup Cost for Facility j
Handling cost for product p in facility j

Decision Variable :

Decision Variable :

Decision Variable :

flow of product p from node i to node j

1, if environment protection level l is selected

flow of product p from node i to node j

Total Cost =

Total

Transportation

Cost

+

Fixed Setup

Cost

+

Handling

Cost

Parameter :

Fixed environmental investment and per unit

Parameter :

Environmental influence in facility j under l environmental level Environmental Investment in Facility j
Environmental influence in facility j under l environmental level
Environmental Investment in Facility j

Decision Variable :

Decision Variable :

Total CO2

Emission =

Amount of product p handling in facility j unt\der

the environment protection level in facility j

l environmental protection level

+

CO2 Emission from Supplier to facility and how to transport it

CO2 Emission in all Facilities

Methodology

(4/7)

Solving Approach

Methodology ( 4 /7) Solving Approach It is well-known that there exist multiple non- dominated solutions

It is well-known that there exist multiple non- dominated solutions for a multi-objective optimization problem. Those solutions are called

“Pareto optimal” solutions.

In this paper, our objective is to obtain a “Pareto frontier” which provides evenly distributed Pareto solutions and it is convenient for decision maker to select a suitable configuration.

In this paper, it is important to obtain a well distributed Pareto frontier as we are investigating how different parameters influence the decision making behavior and we are aim to provide an effective decision support tool for industry.

Methodology

(5/7)

3. Computational Experiments

The decision maker should determine:

(1)

Where to set up the facility ?

(2)

How to set environmental protection level ?

The problem is solved by the

normalized normal constraint method and it is implemented by Microsoft Visual C++ 6.0, and each sub-problem is solved by ILOG CPLEX 9.0 solver

subroutine.

Consider the Six-node network

shown. There are 3 Supplier and 2 product. Each arc is associated with transportation cost and an

amount of CO2 Emission.

(3) Which suppliers should be selected for each facility?

(4) How products are transported ?

Methodology

(6/7)

Scenario A : Set the max CO2 Emission 16600

Methodology

(7/7)

Scenario B : Set the max CO2 Emission 12000

Result

Result ( 1 /3) If the Capacity Ratio is increase, it will effect to decrease Cost

(1/3)

If the Capacity Ratio is increase, it will effect to decrease Cost and CO2 Emission.

Definition of Capacity ratio is network capacity over the total demand. Why larger

capacity ratio exhibit lower total cost and lower CO2 Emission? Because when the

demand increases, the network provides more flexibility to conduct logistic cost and CO2 Emission in Transportation Process.

Capacity Ratio = 1
Capacity Ratio = 1

Total Cost =7300, CO 2 = 2300

Capacity Ratio = 1.2 Total Cost = 7000, CO 2 = 2150

Result

Result ( 2 /3) If the Supply Range is Increase, it will effect to decrease Total

(2/3)

If the Supply Range is Increase, it will effect to decrease Total Cost and CO2 Emission.

Supply range means supplier range include the distance and the number of

supplier. Why larger supply range exhibit lower total cost and lower CO2 Emission? Because if the company has close supplier and rich facilities, we can reduce C02 Emission and transportation cost.

Facility X Facility X+2 Supplier Supply Range = [1,1.2]  Total Cost =7300, CO 2 =
Facility
X
Facility
X+2
Supplier
Supply Range = [1,1.2]  Total Cost =7300, CO 2 = 2310
Supply Range = [1.5,2]  Total Cost = 7180, CO 2 = 2280
Facility
Supplier
X
X-2
Facility
Supplier

Before : Total Cost and CO2 Emission 2x+2

After : Total Cost and CO2 Emission 2x-2

Result

Result ( 3 /3) If the Demand is Increase, it will not effect to decrease CO2

(3/3)

If the Demand is Increase, it will not effect to decrease CO2 Emission significantly.

But if the Demand is increase, it will make greater profit, and this profit can

consider to investing more in environmental protection such as purchase equipment or technology.

Result ( 3 /3) If the Demand is Increase, it will not effect to decrease CO2
Result ( 3 /3) If the Demand is Increase, it will not effect to decrease CO2

Methodology

(2/7)

2. Modeling

Parameter :

Parameter :

Parameter :

Parameter :

Setup Cost for Facility j

Methodology ( 2 /7) 2. Modeling Parameter : Parameter : Parameter : Parameter : Setup Cost

Decision Variable : Decision Variable :

Decision Variable :

Environmental Investment in Facility j Handling cost for product p in facility j

Transport cost for product p from facility i to j

Decision Variable :

1, if facility j is open

the environment protection level in facility j

flow of product p from node i to node j

flow of product p from node i to node j

Total Cost =

Fixed Setup

Cost

+

Environmental

Protection

+

Investment

Total

Transportation

Cost

+

Handling

Cost

Parameter :

Parameter :

CO2 emission in facility j for handling product p

Methodology ( 2 /7) 2. Modeling Parameter : Parameter : Parameter : Parameter : Setup Cost

Decision Variable :

Environmental Investment in Facility j

Decision Variable :

Total CO2

Emission =

flow of product p from node i to node j

the environment protection level in facility j

CO2 Emission in all Facilities

+

CO2 Emission from Supplier to facility and how to

transport it

Methodology

(3/7)

  • 2. Solving Approach

Parameter :

Parameter :

Parameter :

Transport cost for product p from facility i to j Setup Cost for Facility j Handling
Transport cost for product p from facility i to j
Setup Cost for Facility j
Handling cost for product p in facility j

Decision Variable :

Decision Variable :

Decision Variable :

flow of product p from node i to node j

1, if environment protection level l is selected

flow of product p from node i to node j

Total Cost =

Total

Transportation

Cost

+

Fixed Setup

Cost

+

Handling

Cost

Parameter :

Parameter :

CO2 emission in facility j for handling product p Environmental Investment in Facility j
CO2 emission in facility j for handling product p
Environmental Investment in Facility j

Decision Variable :

Decision Variable :

Total CO2

Emission =

flow of product p from node i to node j

the environment protection level in facility j

CO2 Emission in all Facilities

+

CO2 Emission from Supplier to facility and how to transport it