Optimize Short to Long Run Supply Chain Planning

There are certain industries that have historically used optimization and related operations research techniques as key components of their standard business practice. The airline and oil industries represent two examples that for decades have heavily utilized Operations Research (OR) techniques to support operations. There are also a wide range of firms that utilize optimization and OR techniques on a much more sporadic or one-off basis. In this chapter, we describe how private industry practitioners can and should employ mathematical optimization models to improve their logistics and supply chain operations at the strategic, tactical and operational levels. Additionally, we recommend approaches that can further the use of optimization and related methods in firms that may not have a rich history of utilizing these valuable techniques. Finally, supply chain operations and planning encompasses an extremely broad array of functions and processes ranging from sourcing and procurement, to manufacturing and distribution, to customer service and delivery, as well as related activities such as information technology applications, collaboration and information sharing strategies, etc. Therefore, for illustrative purposes and to narrow our discussion, in this chapter we focus primarily on manufacturing and distribution planning and operations; two key logistics and supply chain activities.2 To facilitate this discussion, we first review a hierarchical framework for organizing logistics and supply chain operations from the strategic level to the daily operating level. This will provide context for the balance of the chapter. We next consider traditional opportunities to employ optimization and related methods across this framework of activities. The discussion will also address “barriers and impediments” that exist in many organizations which lead to an underutilization of optimization methods. Following this, we review an approach that the author has employed in industry practice to facilitate the use of optimization and related Decision Support System (DSS) methods as a standard business practice. This review will include citations from several implementations. The chapter finishes with some thoughts on potential future directions in the application of practical optimization DSS models, and then final conclusions. In summary, the objectives of this chapter include the following: