An optimization model for demand-driven distribution resource planning DDDRP

Abstract

Purpose: Demand-Driven Distribution Resource Planning (DDDRP) has recently been proposed in the literature to deal with higher supply networks complexity, shorter customer tolerance times, and inaccurate forecasts. The DDDRP requires to position inventory buffers in critical network nodes, where the inventory level in each buffer is replenished based on actual demands rather than on demand forecasts. This paper aims to identify optimal buffer positions in a distribution network driven by the DDDRP approach and to assess the performance of the DDDRP approach compared to the conventional Distribution Resource Planning (DRP) approach.

Design/methodology/approach: First, a mixed-integer non-linear model is proposed to optimize buffer positioning under supply network constraints and with the objective of minimizing supply chain holding costs. Then, a case study is investigated to validate the optimization model and to evaluate the performance of the optimized distribution network driven by the DDDRP approach, compared to the DRP approach.

Findings: Results of the considered case study demonstrate that the distribution network optimized and driven by the DDDRP approach achieves savings of 75% in terms of total holding costs and 67% in terms of inventory amounts, compared to a distribution network driven by the DRP approach.

Research limitations/implications: Results of this paper cannot be generalized since several assumptions have been considered. Thus, addressing real case studies in different industrial contexts may be of theoretical and practical interest.

Originality/value: This paper is the first to propose a mathematical model to optimize buffer positioning in a distribution network driven by the DDDRP approach.