Balancing Responsiveness and Economics in Process Supply Chain Design with Multi-Echelon Stochastic Inventory

This article is concerned with the optimal design of multi-echelon process supply chains (PSCs) under economic and responsive criteria with considerations of inventory management and demand uncertainty. The multi-echelon inventory systems are modeled with the guaranteed service approach to handle the uncertain demands at each echelon. The maximum guaranteed service time of the last echelon of the PSC is proposed as a measure of a PSC's responsiveness. The problem is formulated as a bi-criterion mixed-integer nonlinear program (MINLP) with the objectives of minimizing the annualized cost (economic objective) and minimizing the maximum guaranteed service times of the markets (responsiveness objective). The model simultaneously predicts the optimal network structure, transportation amounts, and inventory levels under different specifications of the PSC responsiveness. An example on acetic acid supply chain is presented to illustrate the application of the proposed model and to comprehensively compare different measures of PSC responsiveness. (C) 2010 American Institute of Chemical Engineers AIChE J, 57: 178-192, 2011