A Dynamic Multi-Period, Mixed-Integer Linear Programming Model for Cost Minimization of a Three-Echelon, Multi-Site and Multi-Product Construction Supply Chain

Aspasia Koutsokosta and Stefanos Katsavounis
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Aspasia Koutsokosta: Department of Production and Management Engineering, Democritus University of Thrace, 67100 Xanthi, Greece
Stefanos Katsavounis: Department of Production and Management Engineering, Democritus University of Thrace, 67100 Xanthi, Greece

Logistics, 2020, vol. 4, issue 3, 1-35

Abstract: Quantifying the benefits of construction supply chain management through prescriptive models is a challenging and fast-growing research area that still lacks standardized optimization models with full integrative potential. In response to the needs and the peculiarities of the construction industry, this paper proposes an innovative model that merges temporal and project-based supply chains into a sustainable network with repetitive flows, large scope contracts, strategic alliances and economies of scale. It is a dynamic mixed-integer linear programming model for cost minimization of a three-echelon supply chain serving multiple sites with multiple products over a time horizon. Its novelty lies in yielding optimal decisions on network design, product quantities to be purchased and transported, shipments and inventory levels in all echelons under any logistics system in a multi-period, multi-product and multi-project environment with discount schemes and strategic preferences. The model is general enough to be implemented by any general contractor acting as a system integrator but also allows customization with logical constraints. All these features constitute an innovative, versatile and flexible managerial decision making tool. Model implementation is based on a spreadsheet optimization software and is followed by post-solution analysis, sensitivity analysis and multiple parameterized optimizations.

Keywords: construction supply chain management; cost optimization; mathematical modeling; mixed-integer linear programming model; spreadsheet modeling (search for similar items in EconPapers)
JEL-codes: L8 L80 L81 L86 L87 L9 L90 L91 L92 L93 L98 L99 M1 M10 M11 M16 M19 R4 R40 R41 R49 (search for similar items in EconPapers)
Date: 2020
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