Integrating material and cash flows in centralized supply chains: A robust optimization perspective

We introduce a novel multi-period, three-stage robust centralized supply chain model that effectively synchronizes product and financial flows through a unified cash pool. In this model, upstream suppliers produce intermediate goods, which are then processed into final products by manufacturers and sold by retailers facing uncertain demand that characterized by interval-type uncertainty sets. A standout feature is the integration of a financial service platform that pools all entities’ cash resources into a master account. This pool is managed by a centralized decision-maker who allocates funds to finance production and inventory management. The model’s primary goal is to establish a robust optimal strategy for joint production, replenishment, and cash allocation to maximize supply chain profit over the planning horizon. To ensure the model’s solvability, we reformulate its robust counterpart into a mixed binary linear program that can be addressed using standard optimization solvers. Reflecting the practical value of this research, we introduce a myopic policy derived from the model’s structural properties to streamline decision-making. Numerical simulations demonstrate the proposed model’s robustness, consistently showing strong performance even under high demand correlation and variability. By comparing our model against a non-cash pooling alternative, we highlight the significant profitability benefits of cash pooling, particularly when initial wealth is insufficient to fully leverage the supply chain’s productivity potential—a common challenge faced by liquidity-constrained multi-divisional corporations. Notably, under high demand volumes, even the myopic policy surpasses the non-pooling model, illustrating its efficacy.