Synchronized development of production, inventory, and distribution schedules

An integrated optimization model for production and distribution planning is proposed, with the aim of optimally coordinating important and interrelated logistic decisions such as capacity management, inventory allocation, and vehicle routing. The integrated model is solved via Lagrangean relaxation and both lower bounds and heuristic feasible solutions are obtained. Computational results on test problems of various sizes are provided to show the effectiveness of the proposed solution scheme. Moreover, the feasible solution obtained is compared to that generated by an alternative decoupled approach in which a production plan is first developed and a distribution schedule is consequently derived. Computational results seem to indicate a substantial advantage of the synchronized approach over the decoupled decision process.