An integrated Optimization Model of Product Mix, Assortment Packing, and Distribution in A Fashion Footwear Company

Abstract

Recognizing the paramount importance of operational effectiveness and resource management in supply chain management (SCM) of the fashion industry, this study addresses a specific challenge faced by a prominent Indonesian fashion footwear company. The inefficiency is due to repetitive sorting and packaging processes during product distribution, which significantly impact optimal production mixes and product distribution from the distribution center to the point of sale. A crucial aspect is also the optimization of the delivery route. To address these challenges and minimize the total cost of ownership, the study proposes an integrated optimization model. This model simultaneously determines the optimal production quantity, assortment packaging, and distribution channels, taking into account decision variables related to distribution in configuration boxes, overload and underload products, as well as production numbers that respond to store-specific demand fluctuations. A notable contribution of this research is the integration of product mix decisions into the assortment packaging and distribution model, which represents a novel approach. The optimal solution determined using the LINGO 18.0 software highlights the significant influence of product penalty costs and product demand parameters on the objective function, while shipping costs have no noticeable influence. By emphasizing the integration of product mix decisions into the optimization framework, this research contributes significantly to improving the understanding and practical application of efficient supply chain management in the fashion industry.