2019/02/23 by Satya S. Malladi, Malladi, Satya S., Alan L. Erera +3
Business, Management and Accounting · #FOS: Mathematics #Optimization and Control (math.OC) #Quality and Supply Management #Supply Chain and Inventory Management #Sustainable Supply Chain Management
paper · pdf · doi:10.48550/arxiv.1902.08773
openalex publication_date 2019/02/23 · openalex created_date 2022/07/29 · openalex updated_date 2026/07/28
We investigate the potential added value of being able to relocate production\ncapacity, relative to fixed production capacity, in a network of multiple,\ngeographically distributed manufacturing sites. There is a growing interest in\nproduction capacity that can be geographically relocated; e.g., modular units\nfor pharmaceutical intermediates. It shows promise for enabling the fast\nfulfillment of a distributed network with a reduction in the total inventory\nand total production capacity of a distributed network with fixed production\ncapacity without sacrificing customer service levels or total system\nresilience. Allowing also for transshipment, we model a production-inventory\nsystem with L production sites and Y units of relocatable production capacity,\ndevelop efficient and effective heuristic solution methods for dynamic\nrelocation and multi-location inventory control, and analyze the potential\nadded value. We describe the (L, Y) problem as a problem of sequential decision\nmaking under uncertainty to determine transshipment, mobile production capacity\nrelocation, and replenishment decisions at each decision epoch. To enhance\nmodel realism, we use a partially observed stochastic process, the modulation\nprocess, to model the exogenous and partially observable forces (e.g., the\nmacro-economy) that affect demand. We then model the (L, Y) problem as a\npartially observed Markov decision process. Due to the considerable\ncomputational challenges of solving this model exactly, we propose two\nefficient, high quality heuristics. We show for an instance set with five\nlocations that production capacity mobility and transshipment, relative to the\nfixed production capacity case, can improve systems performance by as much as\n41 % on average over the no-flexibility case and that production capacity\nmobility can yield as much as 10 % more savings compared to when only\ntransshipment is permitted.\n