Production and Inter-Facility Transportation with Shipment Size Restrictions

Abstract

This chapter studies production and transportation problem confronting a speciality chemical company that has two manufacturing facilities. Facility I produces intermediate products which are then transported to Facility II where the end products are to be manufactured to meet customers’ demand. The author formulated the problem as a mixed integer programming (MIP) model that integrates the production and transportation decisions between the two facilities. The developed MIP aims to minimize the production, inventory, manpower, and transportation costs. Real industrial data are used to test and validate the developed MIP model. Comparing the model’s results and the company’s actual performance indicate that, if the company implemented the proposed model, significant costs savings could be achieved.