Strategic level three-stage production–distribution planning with capacity expansion

In this paper, we address a strategic planning problem for a three-stage production–distribution network. The problem under consideration is a single-item, multi-supplier, multi-producer, and multi-distributor production–distribution network with deterministic demand. The objective is to minimize the costs associated with production, transportation, and inventory as well as capacity expansion costs over a given time horizon. The limitations are the production capacities of the suppliers and producers, and transportation capacities of the corresponding transportation network. On the other hand, all capacities may be increased at a fixed cost. The problem is formulated as a 0–1 mixed integer programming model. Since the problem is intractable for real life cases efficient relaxation-based heuristics are considered to obtain a good feasible solution.