Production and inter-facility transportation scheduling for a process industry

We study in this paper the problem of coordinating the short-term production and inter-facility transportation scheduling decisions between a plant that produces intermediate products and a finishing plant which processes the intermediate products into finished goods. Our goal is to develop a better understanding of the general relationships between production and transportation scheduling decisions, in particular, how changes in plant capacity and costs affect the coordination of scheduling decisions as well as the choice of transportation modes and carriers. We formulate the problem as a mixed integer programming model and use a solution procedure that expolits the underlying structure of our problem. Using real and simulated data from a process industry firm, our computational study, which compares the production and transportation schedules obtained from coordinated scheduling and sequential scheduling, shows that coordinated schedules yield significant cost savings resulting from the modest use of the expensive fast transport mode, coordinated product changeovers between plants and reduced intermediate product inventories. Discussions of managerial implications of coordinated scheduling are presented.