Simultaneous Planning of Purchase Orders, Production, and Inventory Management Under Demand Uncertainty

This paper focuses on the issues of purchase of primary parts, production planning, and inventory management in primary and secondary warehouses under demand uncertainty simultaneously. The purpose of this study is to determine the optimal volume of purchasing primary parts from different vendors, transportation methods, and production planning over the time horizon, so that with proper management of the inventory of primary parts in the first warehouse, and manufactured products in the second warehouse, the total cost is minimized. This problem is defined as a multi-region, multi-supplier, multicomponent, multi-product, and multi-period problem. There is a time interval between ordering and delivering the primary parts, which depends on the region where the supplier is located. Customer demands are not predetermined, and robust optimization is used to deal with this uncertainty. To evaluate the robustness of the solution and the effect of the level of conservatism on the performance of the proposed model, three numerical examples based on increasing or decreasing the nominal customer demands, are presented. Finally, the price and importance of proposed robust planning, are evaluated using random data