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Combined Use of Mathematical Optimization and Design of Experiments for the Maximization of Profit in a Four-Echelon Supply Chain

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  • Daniel Arturo Olivares Vera
  • Elias Olivares-Benitez
  • Eleazar Puente Rivera
  • Mónica López-Campos
  • Pablo A. Miranda

Abstract

This paper develops a location-allocation model to optimize a four-echelon supply chain network, addressing manufacturing and distribution centers location, supplier selection and flow allocation for raw materials from suppliers to manufacturers, and finished products for end customers, while searching for system profit maximization. A fractional-factorial design of experiments is performed to analyze the effects of capacity, quality, delivery time, and interest rate on profit and system performance. The model is formulated as a mixed-integer linear programming problem and solved by using well-known commercial software. The usage of factorial experiments combined with mathematical optimization is a novel approach to address supply chain network design problems. The application of the proposed model to a case study shows that this combination of techniques yields satisfying results in terms of both its behavior and the obtained managerial insights. An ANOVA analysis is executed to quantify the effects of each factor and their interactions. In the analyzed case study, the transportation cost is the most relevant cost component, and the most relevant opportunity for profit improvement is found in the factor of quality. The proposed combination of methods can be adapted to different problems and industries.

Suggested Citation

  • Daniel Arturo Olivares Vera & Elias Olivares-Benitez & Eleazar Puente Rivera & Mónica López-Campos & Pablo A. Miranda, 2018. "Combined Use of Mathematical Optimization and Design of Experiments for the Maximization of Profit in a Four-Echelon Supply Chain," Complexity, Hindawi, vol. 2018, pages 1-25, April.
    • Handle: RePEc:hin:complx:8731027
    DOI: 10.1155/2018/8731027
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    References listed on IDEAS

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