Responsive production planning and replenishment consolidation scheduling for a two-echelon supply chain

This paper introduces a new mathematical model for production planning and replenishment scheduling in a two-echelon supply chain. The problem addresses production and replenishment coordination, and shipment consolidation decisions in a supply chain that consists of a manufacturer who provides inventory replenishments to multiple distribution centres (DCs). The consolidation activities in this problem are not restricted to specific policies such as aggregation of shipments at regular times or consolidating when a predetermined quantity has accumulated. Rather, we consider the construction of a detailed shipment consolidation schedule over a planning horizon. The problem sheds light on the trade-off between transportation costs, manufacturer inventory holding costs, DC inventory holding costs, and DC backorder costs. We develop a mixed-integer quadratic optimisation model to identify the shipment consolidation schedule that minimises total cost. A genetic algorithm is developed to handle large problem instances. Experimental results show the effectiveness of the proposed solution methods.