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Optimization Helps Shermag Gain Competitive Edge

Author

Listed:
  • Mustapha Ouhimmou

    (Department of Mechanical Engineering, Université Laval, Québec, Québec G1K 7P4, Canada)

  • Sophie D'Amours

    (Department of Mechanical Engineering, Université Laval, Québec, Québec G1K 7P4, Canada)

  • Robert Beauregard

    (Department of Forest and Wood Sciences, Université Laval, Québec, Québec G1K 7P4, Canada)

  • Daoud Ait-Kadi

    (CIRRELT, Department of Mechanical Engineering, Université Laval, Québec, Québec G1K 7P4, Canada)

  • Satyaveer Singh Chauhan

    (Department of Decision Sciences and Management Information Systems, John Molson School of Business, Concordia University, Montréal, Québec H3G 1M8, Canada)

Abstract

Shermag Inc. is a vertically integrated furniture company with business units across the supply chain from the forest to the final customer. During the last decade, Shermag has been losing market share to low-cost Asian manufacturers. To reduce the procurement and other significant costs of Shermag's raw material (wood), which constitute a major component of its total furniture cost, we developed a tool to optimize the tactical planning of the company's wood supply chain. We propose an optimization-based approach for coordinating operations at each echelon of the wood supply chain. However, the problem size caused computer-related issues, such as long processing times and computer crashes. In our proposed solution approach, we use decomposition to overcome these issues. Our implementation uses C++, CPLEX (optimization software), and Microsoft Access. In this paper, we present a comparative study of traditional decision making versus optimal decision making. Using Shermag data for 2004 and 2005, we show that our solution reduces total operations costs by more than 22 percent. For any set of parameters, the tool can generate a good, feasible solution. These results convinced Shermag to use our tool for future configurations of its supply chain network.

Suggested Citation

  • Mustapha Ouhimmou & Sophie D'Amours & Robert Beauregard & Daoud Ait-Kadi & Satyaveer Singh Chauhan, 2009. "Optimization Helps Shermag Gain Competitive Edge," Interfaces, INFORMS, vol. 39(4), pages 329-345, August.
    • Handle: RePEc:inm:orinte:v:39:y:2009:i:4:p:329-345
    DOI: 10.1287/inte.1090.0448
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    References listed on IDEAS

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    Cited by:

    1. Pereira, Daniel Filipe & Oliveira, José Fernando & Carravilla, Maria Antónia, 2020. "Tactical sales and operations planning: A holistic framework and a literature review of decision-making models," International Journal of Production Economics, Elsevier, vol. 228(C).
    2. Saif Benjaafar & David Chen & Rowan Wang, 2017. "Managing Production-Inventory Systems with Scarce Resources," Manufacturing & Service Operations Management, INFORMS, vol. 19(2), pages 216-229, May.
    3. Acar, Yavuz & Atadeniz, Sukran Nilvana, 2015. "Comparison of integrated and local planning approaches for the supply network of a globally-dispersed enterprise," International Journal of Production Economics, Elsevier, vol. 167(C), pages 204-219.

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