Grade selection and blending to optimize cost and quality

In many chemical process applications, a large mix of products is produced by blending them from a much smaller set of basic grades. The basic grades themselves are typically produced on the same process equipment and inventoried in batches. Decisions that arise in this process include selecting the set of basic grades, determining how much of each basic grade to produce, and how to blend basic grades to meet final product demand. We model this problem as a nonlinear mixed-integer program, which minimizes total grade inclusion, batching, blending, and quality costs subject to meeting quality and demand constraints for these products. Heuristics and lower bounds are developed and tested. The methods are applied to data from Europe's leading manufacturer of wheat- and starch-based products. Our results suggest that this model could potentially reduce annual costs by a minimum of 7%, which translates to annual savings of around $5 million.