A Real Case on Making Strategic Logistics Decisions with Production and Inventory Optimization Models

Abstract

A real case is described of the use of industrial optimization models (linear/integer programming) for logistics decisions in the medium term (annual planning) and strategic decisions. The application of these models to optimize annual operations and make strategic decisions on the sizing of storage capacity is studied. The optimization models are built with the author’s software, which is capable of proposing and solving problems of the required size: thousands of equations, tens of thousands of variables and hundreds of thousands of non-zero coefficients. The models demonstrate the enormous power of this methodology and its potential savings in production/transport costs, which were as much as 20% in the case in this work.