A primal decomposition method for the integrated design of multi-period production-distribution systems

We study the integrated design of strategic supply chain networks and the d etermination of tactical production-distribution allocations in the case of customer demands with seasonal variations. Given a set of potential suppli ers, potential manufacturing facilities and distribution centers with multi ple possible configurations, and customers with seasonal demands, the goal is to determine the configuration of the production-distribution system wit h the lowest sum of supply, production, transportation, inventory, and faci lity costs such that seasonal customer demands are met. We develop a mixed integer programming formulation and an integrated design methodology based on primal (Benders) decomposition. For a case study in the packaging indust ry, specialized acceleration techniques reduced the running times by a fact or of 480. The company projects savings of 2% or $8.3 million by using the integrated rather than the optimal hierarchical configuration.