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Integrated decision-making tool for raw material procurement, inventory management, and production planning in the probabilistic environment via bi-objective stochastic programming

Author

Listed:
  • S. Sutrisno
  • S. Solikhin
  • Purnawan Adi Wicaksono

Abstract

In this paper, a mathematical optimisation model is proposed to solve problems in an integrated supply chain including the procurement of raw materials, inventory management, and production planning in a probabilistic environment concerning multiple raw materials, supplier alternatives, product types, and review time. The term 'probabilistic environment' means that there are some unknown parameters treated as a random variable. The bi-objective stochastic programming is used to calculate the optimal decision for the lot of raw materials procured from each supplier and stored in the inventory, and the lot of products manufactured in the production unit. A numerical experiment illustrating the implementation of the provided model is also discussed in this research. The results showed that the given problem is well solved, and the optimal decision is achieved. This confirms that the provided model can be implemented by decision-makers as their decision-making tool.

Suggested Citation

  • S. Sutrisno & S. Solikhin & Purnawan Adi Wicaksono, 2023. "Integrated decision-making tool for raw material procurement, inventory management, and production planning in the probabilistic environment via bi-objective stochastic programming," International Journal of Business Performance and Supply Chain Modelling, Inderscience Enterprises Ltd, vol. 14(2), pages 129-143.
    • Handle: RePEc:ids:ijbpsc:v:14:y:2023:i:2:p:129-143
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