Optimizing the distribution planning process in supply chains with distribution strategy choice

This paper studies the optimization of the distribution planning process in a supply chain
composed of set of production plants, a set of regional warehouses and a set of retail customers.
There are several available distribution strategies, based on direct shipping from the
production plants and indirect shipping through the regional warehouses. A mixed integer
linear programming model is formulated to ensure an optimal replenishment of the regional
warehouses and an optimal choice of the distribution strategies to satisfy the demand of
the customers over a certain time horizon. Computational results are obtained in the real
case of a food supply chain of an Italian subsidiary of a German group, encompassing two
production plants located in Germany and two regional warehouses located in Italy, which
deliver 19 products to 200 retail customers located in Italy. We prove that our solutions are
effective and efficiently computed, with an average optimality gap of 4.43% and found using
a time limit of 4min. A comparison is made with an optimized version of the rule of thumb
applied by the company, to provide managerial insights on the choice of the distribution
strategies. Finally, we show that our solution method is effective when it is applied to more
complex logistic networks.