Optimisation of Supply Chain with Reactive Lateral Transhipment Under Imperfect Production System

Abstract

Because batik is one of the most popular products in Indonesia, improving the supply chain system for batik products, for example total supply chain costs efficiency, will have a substantial and lasting effect on all chains involved. In the batik supply chain, it is common practice for each chain to have an independent policy, resulting in total supply chain cost inefficiency. This paper discusses the development of a mathematical model to optimise batik supply chain with a single-vendor multi-buyers and multi-products. The optimisation model was developed by taking into account the frequent lateral transhipment system in the batik supply chain system as well as the buyers' random demand fluctuations. In addition, the optimisation model takes into account imperfect production systems in the vendor that produce a random number of defective products on a periodic basis. To obtain the optimum solution from the dynamic model, an optimisation-in-the-loop simulation system based on genetic algorithms was then used to solve the developed mathematical model. The presented case study demonstrates that the proposed Genetic Algorithms (GA) able to reach a convergent point; thus, the proposed optimisation-in-the-loop model able to provide an optimum solution for the supply chain system under consideration.