Hierarchical management of an integrated production-logistics system

Abstract

This study analyzes the production-logistics system of a manufacturing environment, where a manufacturer distributes its products to customers via multi-depots, withiri the framework of hierarchical· planning. The production-logistics system is decomposed into two levels; aggregate production~distribution decisions are handled in the first level while vehicle routing decisions are addressed in the second level. The first level problem is further decomposed into production and distribuiion subproblems by using Lagrangean relaxation. Exact and heuristic algorithms are developed· for these subproblems, and a sequential structure is designed to maintain consistency and feasibility between these solutions. Then the result of this level is downloaded to the vehicle routing level where a tabu search heuristic is developed and implemented. Results reveal the importance of coordination and information exchange in a hierarchical plan upon the. overall performance of the integrated production-logistics system.