A two-layered optimisation-based control strategy for multi-echelon supply chain networks

A two-layered optimisation-based control approach for multi-product, multi-echelon supply chain networks with independent production lines is presented. The control strategy applies multivariable model-predictive control principles to the entire network. The optimisation-based control scheme aims at adjusting the decision variables in the supply chain (e.g. transportation loads, product inventory) to satisfy the customer orders with the least operating cost over a specified rolling time horizon using a detailed difference model of the system. A move suppression term that penalises the rate of change in the transported quantities through the network increases the robustness of the control system. Dedicated feedback controllers are utilised to maintain product inventory at all nodes of the supply chain network within pre-specified target levels that are subsequently embedded within the optimisation-based control framework. Simulated results exhibit good dynamic performance under both stochastic and deterministic demand variations. The effects of transportation time delays, size of control horizons and demand forecast models on the control performance are investigated. (C) 2004 Elsevier Ltd. All rights reserved.