An integrated model of supply network and production planning is proposed for the collaboration among refineries manufacturing multiple fuel products at different locations. The simulation and optimization based on the model indicate the following. The distribution costs can be reduced by relocating distribution centers as well as by reconfiguring their linkages to various markets. Moreover, the multiple fuel products manufactured need to be segregated during storage and transportation to be able to satisfy the demands of the various markets. The production planning, therefore, should be an integral part of the supply-network planning, and vice versa. Specifically, the proposed integrated model is for the nationwide supply of multiple fuel products manufactured by the individual refineries. The efficacy and usefulness of the integrated model is illustrated with an example involving three refineries and four varieties of fuel products.
Efficient supply networks have become indispensable for marketing diversified products to meet the varied demands of global customers. A number of major oil refineries and chemical manufacturers producing various fuel and chemical products in large quantities have forged a merger of their operations to manufacture and/or market these products. Such a merger renders it possible to facilitate the acquisition of raw materials, the distribution of intermediates and the delivery of products.
The planning of integrated production has been studied for multi-site refineries and petrochemical complexes where the products are delivered through the fixed networks of pipelines (Jackson & Grossmann, 2003; Neiro & Pinto, 2004; Schulz, Diaz, & Bandoni, 2005). It is highly likely that further integration of supply networks will reduce the distribution cost; this involves reconfiguring the linkages to markets through relocated distribution centers (Melkote & Daskin, 2001; Wu, Zhang, & Zhang, 2006).
The linkages between distribution centers and markets should be planned separately for different fuel products. They need to be segregated during transportation and storage to satisfy the demands of the various markets under different conditions. Meanwhile, the production rates of individual refineries depend on the properties of crude oil, the cut points of distillation units, and the modes of blending operation (Brooks, Van Walsem, & Drury, 1999; Jia & Ierapetritou, 2003; Li, Hui, & Li, 2005; Mendez, Grossmann, Harjunkoski, & Kabore, 2006; Moro, Zanin, & Pinto, 1998). Accordingly, the production planning should be integrated into supply-network planning to enable the production to respond effectively to fluctuations in market demand.
This study aims at establishing an integrated model of supply network and production planning for fuel products. Specifically, the distribution centers are relocated according to a mixed-integer model for profit maximization. Moreover, this mixed-integer model is coupled with the non-linear production model developed by Li et al. (2005). A real-world example is presented to demonstrate the usefulness of the integrated model.
An integrated model of supply network and production planning has been proposed to reduce the distribution costs by reconfiguring the network of distribution centers. The efficacy of deploying this integrated model is demonstrated with a real-world example involving three refineries supplying a nationwide market with four fuel products.
