Optimizing the distribution planning process in supply chains with distribution strategy choice

This paper studies the optimization of the distribution planning process in a supply chain composed of set of production plants, a set of regional warehouses and a set of retail customers. There are several available distribution strategies, based on direct shipping from the production plants and indirect shipping through the regional warehouses. A mixed integer linear programming model is formulated to ensure an optimal replenishment of the regional warehouses and an optimal choice of the distribution strategies to satisfy the demand of the customers over a certain time horizon. Computational results are obtained in the real case of a food supply chain of an Italian subsidiary of a German group, encompassing two production plants located in Germany and two regional warehouses located in Italy, which deliver 19 products to 200 retail customers located in Italy. We prove that our solutions are effective and efficiently computed, with an average optimality gap of 4.43% and found using a time limit of 4min. A comparison is made with an optimized version of the rule of thumb applied by the company, to provide managerial insights on the choice of the distribution strategies. Finally, we show that our solution method is effective when it is applied to more complex logistic networks.