Responsive Make-to-Order Supply Chain Network Design

In this paper we address the network design of a responsive supply chain consisting of make-to-order (make-to-assemble) facilities facing stochastic demand from customers residing at the nodes of a network. Each facility has a certain finite processing capacity and thus the stochasticity of demand may lead to congestion delays at the facilities. Here we intend to determine the number, locations and service capacities of the facilities to minimize the total network cost. We consider two sets of problems. In the first problem we intend to minimize the total network cost while maintaining an acceptable response time with no delays. In the second problem we allow the facilities to fail on time delivery with a penalty. The penalty cost is a function of responsiveness. We assume that no penalty is charged if the order is delivered on or before its acceptable response time. If the order is delivered after its acceptable lead time, the network will be charged a penalty for every unit of time that the order is late from the acceptable delivery date.