Supply chain redesign through optimal asset management and capital budgeting

Abstract Manufacturing and inventory facilities along with the materials present in them are the physical assets of a company. Companies strive to maximize their shareholder values by managing these assets through a variety of business decisions. In this work, we present a new mixed-integer linear programming model for asset management and capital budgeting, which can aid the decision-making process for supply chain redesign. The decisions include facility location, relocation, investment, disinvestment, technology upgrade, production–allocation, distribution, supply contracts, capital generation, etc. To the best of our knowledge, this model is the first to address disinvestment, technology upgrade, material supply contracts, and loans and bonds for capital generation, while including strategic asset management and tactical planning, capacity planning, financial/regulatory factors, and production–distribution. We illustrate the impact of ignoring disinvestment and/or relocation decisions as a 14% decrease in profit for an example case study.

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