A two-layered optimisation-based control strategy for multi-echelon supply chain networks

A new two-layered optimisation-based control approach is developed for multi-product, multi-echelon supply chain networks. The first layer employs simple feedback controllers to maintain inventory levels at all network nodes within pre-specified targets. The feedback controllers are embedded as equality constraints within an optimisation framework that incorporates model predictive control principles for the entire network. The optimisation problem aims at adjusting the resources and decision variables of the entire supply chain network to satisfy the forecasted demands with the least required network operating cost over a specified receding operating horizon. The proposed control strategy is applied to a multi-product supply chain network consisting of four echelons (plants, warehouses, distribution centres, and retailers). Simulated results exhibit good control performance under various disturbance scenarios (stochastic and deterministic demand variation) and transportation time lags.