Solving the Production-Transportation Problem in the Petroleum Industry

One of the important problems in the continuous production industries (such as petroleum industry) is the production-transportation problem. Let us suppose that there are several plants at different locations (refineries, for example) producing certain number of products and large number of customers of their products. Each plant can operate in several modes characterized by different quantities of products and variable production costs. The customers’ demand for each product during the considered time period is known. The production-transportation problem consists of finding the production program for each plant as well as the transportation of products to the customers for which the sum of the production and transportation costs is minimized and for each customer its demand is satisfied from one plant only. The problem is formulated as a bilevel mixed-integer programming problem and solved for the available data from a petroleum company.