A two-echelon logistic network considering outsourcing and demand uncertainty: a case study

In this paper, modelling and solving the two-stage production planning problem under demand uncertainty was studied. The proposed model consisted of two stages: 1) manufacturing the products requested by the customers; 2) packaging final products. In this paper, products in each stage were manufactured in regular time and overtime and if necessary, an outside contractor was employed to manufacture the products in each stage. Therefore, the aim of this study was to reduce production costs, the setup costs of production line, labour costs, maintenance costs and shortage costs. To evaluate the results of the model, a case study of Zarmacaron Company was implemented. After implementing the model and considering the demand parameter uncertainty, a fuzzy programming approach was applied to handle the uncertain parameters and the decisions including total cost, production rates in regular time and overtime and the products manufactured by an outside contractor were determined. Due to demand uncertainty, by increasing α-cut, the degree of uncertainty related to the expected interval of optimistic demand decrease in compared with the amount of production which leads to a significant increase in the shortage costs.