Supply Chain Optimization

Supply chains are encountered in almost every field, and optimizing these processes can yield substantial financial benefits for businesses/companies. This chain encompasses the entire process from sourcing raw materials from suppliers, processing them in factories, storing them in warehouses, and finally delivering them to retailers. In this portfolio project, I will optimize this process using Linear Programming (LP) with Pyomo

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The objective of this study is to minimize costs within a supply chain model while meeting the demands of retailers. The model aims to ensure that products are delivered at the lowest possible cost by optimizing the flow of goods between suppliers, production centers, warehouses, and retailers.

 

However, as you will see shortly, we will have some constraints to consider.

 

We have three different suppliers, production centers (factories), warehouses, and retailers. Each of these entities has distinct capacities and demands, as well as varying production, processing, storage, and sales costs.

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In addition to the costs, transportation costs between each location also vary, and the cost data is presented in the table below

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To make the operations a bit more challenging, we impose quotas on the factories. Accordingly, Factory1 can only use 70% of its capacity, Factory2 can use 100%, and finally, Factory3 can utilize 85% of its capacity. In light of all this information, let’s summarize the system, parameters, variables, constraints, and objective function.

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Result

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