Computers and Chemical Engineering 33 (2009) 19311938

Contents lists available at ScienceDirect

Computers and Chemical Engineering

journal homepage: www.elsevier.com/locate/compchemeng

Supply chain optimisation for the process industries:

Advances and opportunities
Lazaros G. Papageorgiou
Centre for Process Systems Engineering, Department of Chemical Engineering, UCL (University College London),
Torrington Place, London WC1E 7JE, UK

a r t i c l e

i n f o

Article history:
Received 30 October 2008
Received in revised form 29 May 2009
Accepted 1 June 2009
Available online 21 June 2009
Keywords:
Supply chain optimisation
Process industries
Strategic/tactical decisions

a b s t r a c t
Supply chain management and optimisation is a critical aspect of modern enterprises and a ourishing
research area. This paper presents a critical review of methodologies for enhancing the decision-making
for process industry supply chains towards the development of optimal infrastructures (assets and network) and planning. The presence of uncertainty within supply chains is discussed as an important
issue for efcient capacity utilisation and robust infrastructure decisions. The incorporation of business/nancial and sustainability aspects is also considered and future challenges are identied.
2009 Elsevier Ltd. All rights reserved.

1. Introduction
Modern industrial enterprises typically involve multiproduct, multi-purpose and multi-site facilities operating in different
regions and countries and dealing with a global-wide international clientele. In such multi-enterprise networks, the issues of
global enterprise planning, coordination, cooperation and robust
responsiveness to customer demands at the global and local level
are critical for ensuring effectiveness, business competitiveness,
sustainability and growth. In this context, it has long been recognised that there is a need for efcient integrated approaches to
reduce capital and operating costs, increase supply chain productivity and improve business responsiveness. This can be achieved by
considering various levels of enterprise management, plant-wide
coordination and plant operation, in a systematic way (Grossmann,
2005; Varma, Reklaitis, Blau, & Pekny, 2007).
A supply chain is a network of facilities and distribution mechanisms that performs the functions of material procurement,
material transformation to intermediates and nal products, and
distribution of these products to customers. Nowadays, there are
many useful web sources for supply chain management such
as the Supply Chain Council (www.supply-chain.org), Council of
Supply Chain Management Professionals (cscmp.org), and Supply Chain Management Institute (scm-institute.org). A denition
for supply chain management provided by theSupplyChain.com
(www.thesupplychain.com) is:

Tel.: +44 20 76792563; fax: +44 20 73832348.

E-mail address: l.papageorgiou@ucl.ac.uk.
0098-1354/$ see front matter 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.compchemeng.2009.06.014

SCM is a strategy where business partners jointly commit to

work closely together, to bring greater value to the consumer
and/or their customers for the least possible overall supply cost.
This coordination includes that of order generation, order taking
and order fullment/distribution of products, services or information. Effective supply chain management enables business
to make informed decisions along the entire supply chain, from
acquiring raw materials to manufacturing products to distributing nished goods to the consumers. At each link, businesses
need to make the best choices about what their customers need
and how they can meet those requirements at the lowest possible cost.
Similar denitions of supply chain management are:
Supply chain management is a set of approaches utilized to efciently integrate suppliers, manufacturers, warehouses, and stores,
so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to
minimize system wide costs while satisfying service level requirements (Simchi-Levi, Kaminsky, & Simchi-Levi, 1999).
Supply chain management is the coordination of production, inventory, location, and transportation among the participants in the
supply chain to achieve the best mix of responsiveness and efciency
for the market being served (Hugos, 2003).
Supply chain analysis is a key to achieving enterprise efciency as a system view is taken rather than a functional or
hierarchical one. Enterprises cannot be competitive without considering supply chain activities. This is partially due to the evolving

1932

L.G. Papageorgiou / Computers and Chemical Engineering 33 (2009) 19311938

higher specialisation in a more differentiated market. Most importantly, competition drives companies to reduced cost structures
with lower inventories, more effective transportation systems, and
transparent systems able to support information throughout the
supply chain. A single company can rarely control the production
of a commodity together with sourcing, distribution and retail.
Many typical supply chains today have production plants that
are distributed over several countries and corresponding markets
are to be found globally. The key impact factors on process supply
chains are (i) global presence and growth representing almost 1650
billion Euro (excluding pharmaceuticals) in world annual revenues
(source: www.cec.org), (ii) large, inter-regional ows between different geographic/trading blocs and (iii) new investments taking
place worldwide. So, the opportunities for supply chain improvements mainly through optimisation-based frameworks are large.
The costs of keeping inventory throughout the supply chain so
as to maintain high customer service levels are generally signicant. There is often wide scope to reduce this inventory while still
maintaining high service standards. Furthermore, the manufacturing processes can be improved to employ more efciently current
working capital and labour.
It has widely been recognised that enhanced performance of
supply chains necessitates: (i) appropriate design of supply chain
networks and their components; (ii) effective allocation of available
resources over the network (Shah, 2005). The necessity to develop
strategic and tactical level supply chain planning models in order
to address issues in a quantitative manner, rather than the qualitative approaches commonly used, is acknowledged by the industry
(Shapiro, 2001, 2004). In the last few years, there has been a multitude of efforts focused on providing improvements of supply chain
management and optimisation (see for example, Papageorgiou &
Georgiadis, 2008).
Management of supply chains is a complex task mainly due to
large size of the physical supply network and inherent uncertainties. In a highly competitive environment, improved decisions are
required for efcient supply chain management at both strategic
and operational levels with time horizons ranging from several
years to a few days, respectively. Depending on the level (strategic, tactical or operational), one or more of the following decisions
are taken:
Number, size and location of manufacturing sites, warehouses
and distribution centres, and the resources inside them.
Production decisions related to plant production planning and
scheduling.
Network connectivity (e.g. allocation of suppliers to plants, warehouses to markets etc.).
Management of inventory levels and replenishment policies.
Transportation decisions concerning mode of transportation (e.g.
road, rail etc.) and also sizes of material shipments.
The quality of the efciency and effectiveness of the derived
supply chain networks can be assessed by establishing appropriate performance measures (Beamon, 1998). Such measures can
be used to either design a system with appropriate level of performance or compare alternative systems. Suitable quantitative
performance measures include: (i) measures based on nancial
ow (cost minimisation, sales maximisation, prot maximisation,
inventory investment minimisation and return on investment);
and (ii) measures based on customer responsiveness (ll rate
maximisation, product lateness minimisation, customer response
time minimisation, and lead time minimisation). A number of
quantitative indicators for assessing supply chain performance
can also be found at various sources such as the Supply Chain
Council (www.supply-chain.org) and the Supply Chain Metric.com
(www.supplychainmetric.com).

In addition to the above performance measures, the process

industries are attempting to undertake signicant transformations
and will need to face new challenges in the future. These include:
(i) changing market circumstances and increased competition, with
shorter product life cycles; (ii) improved sustainability and environmental and social impacts throughout the supply chain; (iii) future
regulation and compliance requirements (for example the responsibility to recover and recycle consumer products at end-of-use).
The key issues in supply chain management can broadly be
divided into three main categories: (i) supply chain design (infrastructure), (ii) supply chain planning and scheduling and (iii) supply
chain control (real-time management).
Supply chain models can either be mathematical programming
or simulation-based and their application depends on the task in
hand. Mathematical programming models are used to optimise
high-level decisions involving unknown congurations, taking an
aggregate view of the dynamics and detail of operation (e.g. supply
chain network design, medium term production and distribution
planning). On the other hand, simulation models can be used to
study the detailed dynamic operation of a xed conguration under
operational uncertainty, and can be used to evaluate expected performance measures for the xed conguration to a high level of
accuracy.
This paper focuses on mathematical programming models
for supply chain optimisation problems for the process industry
at strategic and tactical level (supply chain design and planning/scheduling). A number of mathematical models have been
presented in the recent literature with various features: steadystate, multiperiod, deterministic or stochastic. These will be
discussed in the next two sections. Integration of business and
sustainability aspects within process supply chains will also be discussed in Sections 4 and 5. Finally, some concluding remarks and
discussion of future research needs and opportunities are drawn in
Section 6.

2. Supply chain design and planning

Supply chain design and planning determines the optimal
infrastructure (assets and network) and also seeks to identify how
best to use the production, distribution and storage resources in
the chain to respond to orders and demand forecasts in an economically efcient manner. It is envisaged that large benets stem
from co-ordinated planning across sites, in terms of costs and market effectiveness. Most business processes dictate that a degree of
autonomy is required at each manufacturing and distribution site,
but pressures to co-ordinate responses to global demand, while
minimising cost, imply that simultaneous planning of production
and distribution across plants and warehouses should be undertaken.
The need for such co-ordinated planning has long been
recognised in the management science and operations research
literature. Mathematical models may be static (steady-state) or
dynamic (multiperiod). Early research in this eld was mainly
focused on locationallocation, static models. Geoffrion and Graves
(1974) present a model to solve the problem of designing a distribution system with optimal location of the intermediate distribution
facilities between plants and customers. The risks arising from the
use of heuristics in distribution planning were also identied and
discussed early on by Geoffrion and Vanroy (1979). Three examples
were presented in the area of distribution planning demonstrating the failure of common sense methods to come up with the best
solution.
Brown, Graves, and Honczarenko (1987) present an
optimisation-based decision algorithm for a support system
used to manage complex problems involving facility selection,

L.G. Papageorgiou / Computers and Chemical Engineering 33 (2009) 19311938

equipment location and utilisation, and manufacture and distribution of products. They focus on operational issues such as
where each product should be produced, how much should be
produced in each plant, and from which plant product should be
shipped to customer. The resulting MILP model is solved using a
decomposition strategy. It is applied to a real case study for the
NABISCO company. Pooley (1994) presents the results of an MILP
formulation used by the Ault Foods company to restructure their
supply chain. The model aims to minimise the total operating cost
of a production and distribution network. Data are obtained from
historical records; data collection is described as one of the most
time consuming parts of the project. Camm et al. (1997) present a
methodology by combining integer programming, network optimisation and geographical information systems (GIS) for Procter
and Gambles North American supply chain. The overall problem is
decomposed into a production (productplant allocation) problem
and a distribution network design problem. Signicant benets
are reported with reconstruction of Procter and Gambles supply
chain (reduction of 20% in production plants) and annual savings
of $200 million.
Sabri and Beamon (2000) develop a steady-state mathematical model for supply chain management by combining strategic
and operational design and planning decisions using an iterative
solution procedure. A multi-objective optimisation procedure is
used to account for multiple performance measures. Tsiakis, Shah,
and Pantelides (2001) describe a mixed integer linear programming model to determine production capacity allocation among
different products, optimal layout and ow allocations of the distribution network by minimising an annualised network cost. Tsiakis
and Papageorgiou (2008) consider production and distribution networks with special emphasis on productsite allocation, workload
balances among sites and outsourcing possibility when demand
cannot be satised.
A number of multiperiod mathematical models have been proposed for process industry supply chains. Wilkinson, Cortier, Shah,
and Pantelides (1996) describe a continent-wide industrial case
study using an aggregate model for the detailed problem. This
involved optimally planning the production and distribution of a
system with 3 factories and 14 market warehouses and over a hundred products. A great deal of exibility existed in the network
which, in principle, enables the production of products for each
market at each manufacturing site. Voudouris (1996) develops a
mathematical model designed to improve efciency and responsiveness in a supply chain. The target is to improve the exibility
of the system. He identies two types of manufacturing resources:
activity resources and inventory resources. The objective function
aims at representing the exibility of the plant to absorb unexpected demands. McDonald and Karimi (1997) consider multiple
facilities which effectively produce products on single-stage continuous lines for a number of geographically distributed customers.
Their basic model is of multiperiod linear programming (LP) form,
and takes account of available processing time on all lines, transportation costs and shortage costs. An approximation is used for
the inventory costs, while product transitions are not modelled.
A mixed integer linear programming model is proposed by
Timpe and Kallrath (2000) for the optimal planning of multisite production networks. The model is multiperiod based on a
time-indexed formulation allowing equipment items to operate
in different modes. A novel feature of the model is that it can
accommodate different timescales for production and distribution
of variable length thus facilitating ner resolution at the start of
the planning horizon. The above model was applied to a production
network of four plants located in three different regions. A larger
example is briey described in Kallrath (2000), demonstrating the
use of an optimisation model involving 7 production sites with 27
production units operating in xed-batch mode.

1933

Jin-Kwang, Grossmann, and Park (2000) present a multiperiod

optimisation model for continuous process networks with main
focus on operational decisions over short time horizons (1 week to 1
month). Special features of the supply chain are taken into account
such as sales, intermittent deliveries, production shortfalls, delivery
delays, inventory proles and job changeovers.
Papageorgiou, Rotstein, and Shah (2001) present an
optimisation-based approach for pharmaceutical supply chains
(for a review see Shah, 2004) to determine the optimal product
portfolio and long-term capacity planning at multiple sites. The
problem takes into account both the particular features of pharmaceutical active ingredient manufacturing and the global trading
structures. Sousa, Shah, and Papageorgiou (2005) propose an MILP
model for the optimal product allocationdistribution structure
of a pharmaceutical company supply chain, from primary (active)
ingredients production to nal product distribution to markets.
Two decomposition schemes are developed for the solution of the
large-scale optimisation problem. Sousa, Shah, and Papageorgiou
(2008) present a two-level planning approach for the redesign and
optimisation of production and distribution of an agrochemicals
supply chain network.
Naraharisetti, Karimi, and Srinivasan (2008) present a novel
MILP model for making efcient capacity management and supply
chain redesign decisions for a multinational corporation. The model
can provide the basis for obtaining the best strategy for investment, involving a variety of real decisions such as facility relocation,
disinvestment and technology upgrade.
You and Grossmann (2008) propose a bicriterion MINLP optimisation framework to consider simultaneously economics and
responsiveness of multi-site, multi-echelon process supply chain
networks. An -constraint method has been used for its solution
to produce a Pareto-optimal curve, establishing trade-offs between
net present value and lead time.
Kallrath (2002) describes a multiperiod mathematical model
which combines operational planning with strategic aspects for
multi-site production networks. The model is similar to the one
presented by Timpe and Kallrath (2000) but allows exible production unit-site allocation (purchase, opening, shutdown), and raw
material purchases and contracts. Sensitivity analyses were also
performed, indicating that the optimal strategic decisions were
stable for up to 20% change in demand. Kallrath (2008) presents
an integrated modelling framework addressing various conceptual issues in strategic, multi-site design and planning problems in
the process industry. The need for a combined design and operative planning model is emphasised and efcient tailored made
modelling and solution techniques for real world problems are discussed. Finally, several problems for supply chain planning and
design in large companies focusing on the needs for appropriate
modelling and maintainable IT structures are highlighted.
Jackson and Grossmann (2003) describe a multiperiod nonlinear
programming model for the production planning and distribution
of multi-site continuous multiproduct plants where each production plant is represented by nonlinear process models. Spatial and
temporal decomposition solution schemes based on Lagrangean
decomposition are proposed to enhance computational performance. Neiro and Pinto (2004) present an integrated mathematical
framework for petroleum supply chain planning by considering
reneries, terminals and pipeline networks. The problem is formulated as a multiperiod, mixed integer nonlinear programming
model, and essentially extends previous work (Pinto, Joly, & Moro,
2000) for single renery operations with nonlinear process models and blending relations. The case study solved represents part
of a real-world petroleum supply chain planning problem in Brazil
involving four reneries, ve terminals and pipeline networks for
crude oil supply and product distribution. Multiperiod mathematical models (MILP and MINLP) for petrochemical plants converting

1934

L.G. Papageorgiou / Computers and Chemical Engineering 33 (2009) 19311938

natural gas to nal industrial products are reported by Schulz, Diaz,

and Bandoni (2005).
Concerning hydrogen supply chains, Almansoori and Shah
(2006) propose a steady-state MILP model. Integration of production planning and scheduling issues for this type of supply
chains are considered by van den Heever and Grossmann (2003)
by employing a Lagrangean decomposition approach coupled with
a rolling horizon scheme. Bioenergy supply chains are also studied
by Dunnett, Adjiman, and Shah (2007) based an STN-based MILP
approach to represent features such as harvesting, drying, storage
and transportations activities.
It has also been recognised that in addition to production
processes, efcient logistics operations can greatly enhance supply chain performance. Karimi, Sharafali, and Mahalingam (2005)
propose a two-step procedure for the tank container management problem in chemical logistics by combining an event-based
approach with a linear programming algorithm. Huang and Karimi
(2006) focus on transhipment operations of liquid chemical cargos
and propose MILP models based on continuous-time representations. Al-Ameri, Shah, and Papageorgiou (2008) propose a rolling
horizon approach for the ship-scheduling problem by combining aggregate and detailed MILP models. A single-level MILP is
described by Amaro and Barbosa-Povoa (2008) by integrating operational decision and transportation policies. Dondo, Mendez, and
Cerda (2008) consider an MILP-based approach focused on the
operational level of multiple vehicle pickup and delivery problems
with time windows commonly arising in multi-site systems.
Overall, the area of supply chain design and planning has evolved
and matured over the past decades. Optimisation and decomposition solution algorithms are now able to solve a wide range of
problems of industrial relevance. Some issues still remain to be
addressed such as (i) level of detail in the process representation, (ii)
potential integration with process modelling tools, (iii) dealing efciently with size of problem, (iv) dealing with model nonlinearities,
and (v) inclusion of performance measures other than cost/prot.

3. Uncertainty in supply chains

The previous section described deterministic models used for
strategic and tactical planning in process supply chains. The need
to account for uncertainty (e.g. in product demand and prices, raw
material availability, product launch, geopolitical changes etc.) has
widely been recognised as an important issue. Systematic consideration of uncertainty can facilitate calculation of expected return and
evaluation of associated risks based on current status and future
predictions. Comprehensive reviews on optimisation under uncertainty for process systems engineering applications can be found
by Sahinidis (2004), Cheng, Subrahmanian, and Westerberg (2005)
and Li and Ierapetritou (2008).
Optimisation models that incorporate uncertainty are usually
large in size and difcult to solve. Most recent work applied to
process supply chains is based on stochastic programming formulations. The most popular of these involves two-stage mathematical
models comprising two types of decision variables: here-and-now
(design) variables of the rst stage and wait-and-see (control) variables of the second stage; these decisions are determined before
and after realisation of uncertain parameters, respectively. In terms
of modelling uncertainty, the latter can be represented either by a
discrete number of scenarios or by probability distributions.
For long-range planning of process networks, uncertainty in
demands and prices are modelled in Liu and Sahinidis (1996) and
Iyer and Grossmann (1998) by using a number of scenarios for each
time period thus resulting in multiscenario multiperiod optimisation models. Computational enhancements of the above large-scale
model have been proposed by applying projection techniques (Liu

& Sahinidis, 1996) or bilevel decomposition (Iyer & Grossmann,

1998). A potential limitation of these approaches is that they use
expectations rather than a variability metric of the second-stage
costs. Ahmed and Sahinidis (1998) resolve this difculty by introducing a one-side robustness measure that penalises second-stage
costs that are above the expected cost. Similar measures based on
expected downside risk have been developed by Eppen, Martin, and
Schrage (1989). These have also been applied to capacity planning
problems for pharmaceutical products at different stages in clinical
trials (Gatica, Papageorgiou, & Shah, 2003) and to design/retrot
of supply chains (Guillen, Mele, Bagajewicz, Espuna, & Puigjaner,
2005).
Applequist, Pekny, and Reklaitis (2000) focus on risk management for chemical supply chain investments. They introduce the
risk premium approach in order to determine the right balance
between expected value of investment performance and associated variance. An investment decision is approved, provided that its
expected return is better than the corresponding ones in the nancial market with similar variance. An efcient polytope integration
procedure is described to evaluate expected values and variances.
Gupta and Maranas (2000) consider the problem of mid-term
supply chain planning under demand uncertainty. A two-stage
stochastic programming approach is proposed with the rst
stage determining all production decisions (here-and-now) and all
supply chains decisions are optimised in the second stage (waitand-see). This work is extended by Gupta, Maranas, and McDonald
(2000) by integrating the previous two-stage framework with a
chance constraint programming approach to capture the trade-offs
between customer demand satisfaction and production costs. The
proposed approach was applied to the problem of McDonald and
Karimi (1997).
Demand uncertainty is also introduced in the mathematical
model of Tsiakis et al. (2001) by using a scenario-based approach
with each scenario representing a possible future outcome and having a given probability of occurrence. Gupta and Maranas (2003)
propose a bilevel optimisation-based framework for supply chain
planning under demand uncertainty by considering here-and-now
manufacturing decisions and wait-and-see logistics decisions. A
multiperiod supply chain planning model under demand uncertainty is described by Gupta and Maranas (2004) by adopting a real
options framework.
Ahmed and Sahinidis (2003) propose a fast approximation
scheme for solving multi-scenario integer optimisation problems,
which is particularly relevant to capacity planning problems under
discrete uncertainty.
Ryu, Dua, and Pistikopoulos (2004) present a bilevel approach
for the problem of supply chain network planning under uncertainty. The resulting optimisation problem is then solved efciently
using parametric programming techniques.
Levis and Papageorgiou (2004) extend previous work of
Papageorgiou et al. (2001) to consider uncertainty of the outcome of
clinical trials. They propose a two-stage, multiscenario, MILP model
to determine both the product portfolio and the multi-site capacity planning while taking into account the trading structure of the
company. A hierarchical solution algorithm is proposed for solution
efciency.
A multi-objective stochastic MILP model is proposed by
Guillen et al. (2005) using a multi-scenario representation for
the design/retrot of supply chains. The formulation takes into
account multiple objectives including prot, customer satisfaction
and nancial risk (Barbaro & Bagajewicz, 2004).
A multistage stochastic programming approach is proposed by
Guillen, Mele, Espuna, and Puigjaner (2006) for the supply chain
design problem under demand uncertainty by integrating strategic
and tactical/operational levels. A decomposition solution strategy
is also proposed combining genetic algorithms for the strategic

L.G. Papageorgiou / Computers and Chemical Engineering 33 (2009) 19311938

level and mathematical programming techniques for the lower

level.
Robust scenario-based mixed integer optimisation frameworks
for reverse production systems are described for carpet recycling
(Realff, Ammons, & Newton, 2004) and electronics scrap by Hong
et al. (2006). Salema, Barbosa-Povoa, and Novais (2007) describe a
scenario-based approach for general closed-loop supply chains by
incorporating facility capacity limits, multiproduct and uncertainty
on products demands and returns.
In summary, the problem of supply chain optimisation under
uncertainty is clearly a relatively new problem and methodologies are still emerging, the most popular of which is stochastic
programming. Issues remaining to be addressed include accurate
characterisation of uncertainty and the numerical solution of the
large-scale problems that inevitably arise in this context.

4. Integration with business/nancial aspects

As many of modern supply chains have a strong international
aspect, optimisation-based decisions are required for various features such as taxes, duties, transfer prices etc. In general, the supply
chains can be categorised into domestic and international ones
depending on whether they are based on a single country or multiple countries, respectively (Vidal & Goetschalckx, 1997). The latter
case is more complex as more global aspects need to be considered
such as: (i) different tax regimes and duties; (ii) exchange rates; (iii)
transfer prices; (iv) differences in operating costs. Thus, systematic
integration of business/nancial and planning models should be
considered for efcient supply chain management (see for example,
Shapiro, 2004).
Papageorgiou et al. (2001) study pharmaceutical supply chains
to determine the optimal product portfolio and long-term capacity
planning at multiple sites. Special emphasis is placed upon modelling of nancial ows between supply chain components for a
given trading structure.
A detailed insight on the effect of regulatory factors (corpo-

1935

1936

L.G. Papageorgiou / Computers and Chemical Engineering 33 (2009) 19311938

of a multinational corporation. The model also considers transfer

prices and the allocation of transportation costs as explicit decision
variables.
Gjerdrum, Shah, and Papageorgiou (2001) present a mixed integer nonlinear programming (MINLP) model including a nonlinear
Nash-type objective function for fair prot optimisation of an nenterprise supply chain network. The supply chain planning model
considers inter-company transfer prices, production and inventory
levels, resource utilisation, and ows of products between echelons.
Efcient solution procedures for the above model are described
by Gjerdrum et al. (2001) and Gjerdrum, Shah, and Papageorgiou
(2002) based on separable programming and spatial branch-andbound respectively. Computational results indicate total prots
very close to those obtained by simple single-level optimisation
(e.g. maximisation of total prot) but more equitably distributed
among partners.
Chen, Wang, and Lee (2003) propose a fuzzy decision-making
approach for fair prot distribution for multi-enterprise supply
chain networks. The proposed framework can accommodate multiple objectives such as maximisation of the prot of each participant
enterprise, the customer service level, and the safe inventory level.

5. Towards sustainable and environmentally conscious

supply chains
Recently, there have been new pressures to evaluate report and
improve sustainability, environmental and social impacts throughout the supply chain (see for instance, GHG potential associated
with global warming, urban air quality, resource depletion etc.).
As a result, there has been a growing interest for the systematical incorporation of environmental aspects within supply chain
management systems. Each entity of the supply chain including
suppliers, manufactures, distribution/retailers and customers is
associated with products, processes and/or transportation activities which affect environment. The need for integrated frameworks
combining economic-based and environmental aspects is evident
for sustainable supply chains. This requires the quantication of
sustainability or environmental impact of a supply chain (preferably using life-cycle based indicators, see for instance Azapagic,
1999) and the use of these measures in the optimisation models,
potentially leading to multicriteria frameworks.
Zhou, Cheng, and Hua (2000) describe a goal programming
approach to account for sustainability aspects for supply chains of
continuous processes.
Collaborative supply chain management for improved business
and reduced environmentally harmful chemicals while satisfying
local regulations and Kyoto protocol for greenhouse gas emissions
is demonstrated by Turkay, Oruc, Fujita, and Asakura (2004) and
Soylu, Oruc, Turkay, Fujita, and Asakura (2006).
Combination of life cycle assessment criteria with design and
long-range planning of multi-enterprise supply chain networks is
proposed by Hugo and Pistikopoulos (2005). The proposed mathematical programming framework is applied to a bulk chemicals
supply chain. A multi-objective optimisation approach for hydrogen networks is described by Hugo, Rutter, Pistikopoulos, Amorelli,
and Zoia (2005) capturing the trade-offs between investment NPV
and greenhouse gas emissions.
Nowadays, there is an increasing interest in reverse logistics and
closed-loop supply chains aiming to collect and re-use products at
the end of their life (see for example Guide, Jayaraman, & Linton,
2003). This will allow companies both to comply with environmental legislation and to increase economic benets from reduced use
of raw materials and added value from recovery.
Realff et al. (2004) describe a mathematical programming
approach for the strategic design of reverse production systems for

carpet recycling. Similar approaches are reported for other product recovery networks (for example, home appliances by Shih,
2001; copiers by Krikke, van Harten, & Schuur, 1999; batteries by
Schultmann, Engels, & Rentz, 2003; uorescent lamps by Lee, Shah,
& Papageorgiou, 2008).
Closed-loop supply chains combine forward and reverse networks. Illustrative examples of such combinations have been given
by Jayaraman, Guide, and Srivastava (1999), Fleischmann, Beullens,
Bloemhof-Ruwaard, and Van Wassenhove (2001), and Salema,
Povoa, and Novais (2006).
6. Future challenges
It is clear that a considerable amount of fruitful research work
has already been carried out on process supply chains especially in
the areas of network design and planning. However, a number of
issues can provide interesting future research challenges.
The treatment of uncertainty requires further research effort to
capture aspects such as product prices, resource availabilities etc.
In order to ensure that investment decisions are made optimally in
terms of both reward and risk, suitable frameworks for the solution of supply chain optimisation problems under uncertainty are
required. Most of the existing frameworks are suitable for two-stage
problems while there is a need for appropriate multi-stage, multiperiod optimisation frameworks for supply chain management
(see for example frameworks by Balasubramanian and Grossmann
(2004), Guillen et al. (2006) and Wu and Ierapetritou (2007)).
As most of the resulting optimisation problems and predominantly cases under uncertainty will be of large scale, there is great
need for developing efcient solution procedures. Aggregation and
decomposition techniques are envisaged as such promising solution alternatives. It is quite important to maintain industrial focus
for the successful development of such solution methods.
The models for geographically distributed supply chain networks are inevitably large and complex, and usually incorporate
phenomena at different scales of relevance. Appropriate multiscale
approaches need to be developed.
Another emerging research area is the systematic incorporation of environmental impact indicators within supply chain
management systems thus necessitating the development of multiobjective optimisation frameworks.
Finally, research opportunities are evident in the appearance
of new types of supply chain associated with: (i) sustainability and resource efciency (for example, hydrogen, bioenergy,
water provision/distribution, CO2 infrastructure design and planning, reduction of waste and landll, utilisation of other scarce
resources); (ii) healthcare (customised healthcare products, fast
response therapeutics).
Acknowledgments
The author is grateful to Nilay Shah, Jonatan Gjerdrum, Panagiotis Tsiakis, Gabriel Gatica, Aaron Levis, Tareq Al-Ameri and Rui
Sousa for useful discussions and contributions to his work.
References
Ahmed, S., & Sahinidis, N. V. (1998). Robust process planning under uncertainty.
Industrial & Engineering Chemistry Research, 37, 18831892.
Ahmed, S., & Sahinidis, N. V. (2003). An approximation scheme for stochastic integer
programs arising in capacity expansion. Operations Research, 51, 461471.
Al-Ameri, T. A., Shah, N., & Papageorgiou, L. G. (2008). Optimization of vendormanaged inventory systems in a rolling horizon framework. Computers &
Industrial Engineering, 54, 10191047.
Alles, M., & Datar, S. (1998). Strategic transfer pricing. Management Science, 44,
451461.
Almansoori, A., & Shah, N. (2006). Design and operation of a future hydrogen supply
chainSnapshot model. Chemical Engineering Research & Design, 84, 423438.

L.G. Papageorgiou / Computers and Chemical Engineering 33 (2009) 19311938

Amaro, A. C. S., & Barbosa-Povoa, A. P. F. D. (2008). Supply chain management
with optimal scheduling. Industrial & Engineering Chemistry Research, 47, 116
132.
Applequist, G. E., Pekny, J. F., & Reklaitis, G. V. (2000). Risk and uncertainty in managing chemical manufacturing supply chains. Computers & Chemical Engineering,
24, 22112222.
Azapagic, A. (1999). Life cycle assessment and its application to process selection,
design and optimisation. Chemical Engineering Journal, 73, 121.
Badell, M., Romero, J., Huertas, R., & Puigjaner, L. (2004). Planning, scheduling and
budgeting value-added chains. Computers & Chemical Engineering, 28, 4561.
Balasubramanian, J., & Grossmann, I. E. (2004). Approximation to multistage
stochastic optimization in multiperiod batch plant scheduling under demand
uncertainty. Industrial & Engineering Chemistry Research, 43, 36953713.
Ballou, R. H., Gilbert, S. M., & Mukherjee, A. (2000). New managerial challenges from
supply chain opportunitiesSelling and sales management in action: The use of
insight coaching to improve relationship selling. Industrial Marketing Management, 29, 718.
Bansal, M., Karimi, I. A., & Srinivasan, R. (2007). Optimal contract selection for the
global supply and distribution of raw materials. Industrial & Engineering Chemistry Research, 46, 65226539.
Barbaro, A., & Bagajewicz, M. J. (2004). Managing nancial risk in planning under
uncertainty. AIChE Journal, 50, 963989.
Beamon, B. M. (1998). Supply chain design and analysis: Models and methods. International Journal of Production Economics, 55, 281294.
Brown, G. G., Graves, G. W., & Honczarenko, M. D. (1987). Design and operation of a
multicommodity productiondistribution system using primal goal decomposition. Management Science, 33, 14691480.
Camm, J. D., Chorman, T. E., Dill, F. A., Evans, J. R., Sweeney, D. J., & Wegryn, G. W.
(1997). Blending OR/MS, judgment, and GIS: Restructuring P&Gs supply chain.
Interfaces, 27, 128142.
Chen, C. L., Wang, B. W., & Lee, W. C. (2003). Multiobjective optimization for a multienterprise supply chain network. Industrial & Engineering Chemistry Research,
42, 18791889.
Cheng, L., Subrahmanian, E., & Westerberg, A. W. (2005). Multiobjective decision
processes under uncertainty: Applications, problem formulations, and solution
strategies. Industrial & Engineering Chemistry Research, 44, 24052415.
Dondo, R., Mendez, C. A., & Cerda, J. (2008). Solving multiple vehicle pickup and
delivery problems in multisite systems by a rigorous optimization approach. In
L. G. Papageorgiou, & M. C. Georgiadis (Eds.), Supply chain optimization: Part I (pp.
2960). Weinheim: Wiley-VCH.
Dunnett, A., Adjiman, C., & Shah, N. (2007). Biomass to heat supply chains applications of process optimization. Process Safety and Environmental Protection, 85,
419429.
Eppen, G. D., Martin, R. K., & Schrage, L. (1989). A scenario approach to capacity
planning. Operations Research, 37, 517527.
Fleischmann, M., Beullens, P., Bloemhof-Ruwaard, J. M., & Van Wassenhove, L. N.
(2001). The impact of product recovery on logistics network design. Production
and Operations Management, 10, 156173.
Gatica, G., Papageorgiou, L. G., & Shah, N. (2003). Capacity planning under uncertainty for the pharmaceutical industry. Chemical Engineering Research & Design,
81, 665678.
Geoffrion, A. M., & Graves, G. W. (1974). Multicommodity distribution
systemDesign by benders decomposition. Management Science Series
ATheory, 20, 822844.
Geoffrion, A. M., & Vanroy, T. J. (1979). CautionCommon-sense planning methods
can be hazardous to your corporate health. Sloan Management Review, 20, 3142.
Gjerdrum, J., Shah, N., & Papageorgiou, L. G. (2001). Transfer prices for multienterprise supply chain optimization. Industrial & Engineering Chemistry Research, 40,
16501660.
Gjerdrum, J., Shah, N., & Papageorgiou, L. G. (2002). Fair transfer price and inventory
holding policies in two-enterprise supply chains. European Journal of Operational
Research, 143, 582599.
Grossmann, I. E. (2005). Enterprise-wide optimization: A new frontier in process
systems engineering. AIChE Journal, 51, 18461857.
Guide, V. D. R., Jayaraman, V., & Linton, J. D. (2003). Building contingency planning for closed-loop supply chains with product recovery. Journal of Operations
Management, 21, 259279.
Guillen, G., Badell, M., & Puigjaner, L. (2007). A holistic framework for short-term supply chain management integrating production and corporate nancial planning.
International Journal of Production Economics, 106, 288306.
Guillen, G., Mele, E., Bagajewicz, M. J., Espuna, A., & Puigjaner, L. (2005). Multiobjective supply chain design under uncertainty. Chemical Engineering Science, 60,
15351553.
Guillen, G., Mele, F. D., Espuna, A., & Puigjaner, L. (2006). Addressing the design
of chemical supply chains under demand uncertainty. Industrial & Engineering
Chemistry Research, 45, 75667581.
Gupta, A., & Maranas, C. D. (2000). A two-stage modeling arid solution framework for
multisite midterm planning under demand uncertainty. Industrial & Engineering
Chemistry Research, 39, 37993813.
Gupta, A., & Maranas, C. D. (2003). Managing demand uncertainty in supply chain
planning. Computers & Chemical Engineering, 27, 12191227.
Gupta, A., & Maranas, C. D. (2004). Real-options-based planning strategies under
uncertainty. Industrial & Engineering Chemistry Research, 43, 38703878.
Gupta, A., Maranas, C. D., & McDonald, C. M. (2000). Mid-term supply chain planning under demand uncertainty: Customer demand satisfaction and inventory
management. Computers & Chemical Engineering, 24, 26132621.

1937

Hong, I. H., Assavapokee, T., Ammons, J., Boelkins, C., Gilliam, K., Oudit, D., et al.
(2006). Planning the e-scrap reverse production system under uncertainty in
the state of Georgia: A case study. IEEE Transactions on Electronics Packaging
Manufacturing, 29, 150162.
Huang, C., & Karimi, I. A. (2006). Scheduling trans-shipment operations in maritime chemical transportation. Industrial & Engineering Chemistry Research, 45,
19551973.
Hugo, A., & Pistikopoulos, E. N. (2005). Environmentally conscious long-range planning and design of supply chain networks. Journal of Cleaner Production, 13,
14711491.
Hugo, A., Rutter, P., Pistikopoulos, S., Amorelli, A., & Zoia, G. (2005). Hydrogen infrastructure strategic planning using multi-objective optimization. International
Journal of Hydrogen Energy, 30, 15231534.
Hugos, M. (2003). Essentials of supply chain management. John Wiley & Sons.
Iyer, R. R., & Grossmann, I. E. (1998). A bilevel decomposition algorithm for longrange planning of process networks. Industrial & Engineering Chemistry Research,
37, 474481.
Jackson, J. R., & Grossmann, I. E. (2003). Temporal decomposition scheme for
nonlinear multisite production planning and distribution models. Industrial &
Engineering Chemistry Research, 42, 30453055.
Jayaraman, V., Guide, V. D. R., & Srivastava, R. (1999). A closed-loop logistics
model for remanufacturing. Journal of the Operational Research Society, 50, 497
508.
Jin-Kwang, B., Grossmann, I. E., & Park, S. (2000). Supply chain optimization in continuous exible process networks. Industrial & Engineering Chemistry Research,
39, 12791290.
Jose, R. A., & Ungar, L. H. (2000). Pricing interprocess streams using slack auctions.
AIChE Journal, 46, 575587.
Kallrath, J. (2000). Mixed integer optimization in the chemical process
industryExperience, potential and future perspectives. Chemical Engineering
Research & Design, 78, 809822.
Kallrath, J. (2002). Combined strategic and operational planningAn MILP success
story in chemical industry. OR Spectrum, 24, 315341.
Kallrath, J. (2008). Combining strategic design and operative planning in the process
industry. In L. G. Papageorgiou, & M. C. Georgiadis (Eds.), Supply chain optimization: Part I (pp. 219243). Weinheim: Wiley-VCH.
Karimi, I. A., Sharafali, M., & Mahalingam, H. (2005). Scheduling tank container
movements for chemical logistics. AIChE Journal, 51, 178197.
Krikke, H. R., van Harten, A., & Schuur, P. C. (1999). Business case Oce: Reverse logistic
network re-design for copiers. OR Spektrum, 21, 381409.
Lainez, J. M., Guillen-Gosalbez, G., Badell, M., Espuna, A., & Puigjaner, L. (2007).
Enhancing corporate value in the optimal design of chemical supply chains.
Industrial & Engineering Chemistry Research, 46, 77397757.
Lee, C.-G., Shah, N., & Papageorgiou, L. G. (2008). Strategic design and planning of
reverse supply chain with model-based decision support tools. In 5th international conference on computational management science London,
Levis, A. A., & Papageorgiou, L. G. (2004). A hierarchical solution approach for
multi-site capacity planning under uncertainty in the pharmaceutical industry.
Computers & Chemical Engineering, 28, 707725.
Li, Z. K., & Ierapetritou, M. (2008). Process scheduling under uncertainty: Review and
challenges. Computers & Chemical Engineering, 32, 715727.
Liu, M. L., & Sahinidis, N. V. (1996). Optimization in process planning under uncertainty. Industrial & Engineering Chemistry Research, 35, 41544165.
McDonald, C. M., & Karimi, I. A. (1997). Planning and scheduling of parallel semicontinuous processes. 1. Production planning. Industrial & Engineering Chemistry
Research, 36, 26912700.
Naraharisetti, P. K., Karimi, I. A., & Srinivasan, R. (2008). Chemical supply chain
redesign. In L. G. Papageorgiou, & M. C. Georgiadis (Eds.), Supply chain optimization: Part I (pp. 245300). Weinheim: Wiley-VCH.
Neiro, S. M. S., & Pinto, J. M. (2004). A general modeling framework for the operational planning of petroleum supply chains. Computers & Chemical Engineering,
28, 871896.
Oh, H. C., & Karimi, I. A. (2004). Regulatory factors and capacity-expansion planning
in global chemical supply chains. Industrial & Engineering Chemistry Research, 43,
33643380.
Oh, H. C., & Karimi, I. A. (2006). Global multiproduct productiondistribution planning with duty drawbacks. AIChE Journal, 52, 595610.
Papageorgiou, L. G., & Georgiadis, M. C. (Eds.). (2008). Supply chain optimization: Parts
I and II. Process systems engineering. Weinheim: Wiley-VCH.
Papageorgiou, L. G., Rotstein, G. E., & Shah, N. (2001). Strategic supply chain optimization for the pharmaceutical industries. Industrial & Engineering Chemistry
Research, 40, 275286.
Park, M., Park, S., Mele, F. D., & Grossmann, I. E. (2006). Modeling of purchase and
sales contracts in supply chain optimization. Industrial & Engineering Chemistry
Research, 45, 50135026.
Pfeiffer, T. (1999). Transfer pricing and decentralized dynamic lot-sizing in multistage, multiproduct production processes. European Journal of Operational
Research, 116, 319330.
Pinto, J. M., Joly, M., & Moro, L. F. L. (2000). Planning and scheduling models for
renery operations. Computers & Chemical Engineering, 24, 22592276.
Pooley, J. (1994). Integrated production and distribution facility planning at Ault
foods. Interfaces, 24, 113121.
Puigjaner, L., & Guillen-Gonzalez, G. (2008). Bridging the gap between production,
nances, and risk in supply chain optimization. In L. G. Papageorgiou, & M. C.
Georgiadis (Eds.), Supply chain optimization: Part I (pp. 144). Weinheim: WileyVCH.

1938

L.G. Papageorgiou / Computers and Chemical Engineering 33 (2009) 19311938

Realff, M. J., Ammons, J. C., & Newton, D. J. (2004). Robust reverse production system
design for carpet recycling. IIE Transactions, 36, 767776.
Romero, J., Badell, M., Bagajewicz, M., & Puigjaner, L. (2003). Integrating budgeting
models into scheduling and planning models for the chemical batch industry.
Industrial & Engineering Chemistry Research, 42, 61256134.
Ryu, J. H., Dua, V., & Pistikopoulos, E. N. (2004). A bilevel programming framework
for enterprise-wide process networks under uncertainty. Computers & Chemical
Engineering, 28, 11211129.
Sabri, E. H., & Beamon, B. M. (2000). A multi-objective approach to simultaneous
strategic and operational planning in supply chain design. Omega: International
Journal of Management Science, 28, 581598.
Sahinidis, N. V. (2004). Optimization under uncertainty: State-of-the-art and opportunities. Computers & Chemical Engineering, 28, 971983.
Salema, M. I., Povoa, A. P. B., & Novais, A. Q. (2006). A warehouse-based design model
for reverse logistics. Journal of the Operational Research Society, 57, 615629.
Salema, M. I. G., Barbosa-Povoa, A. P., & Novais, A. Q. (2007). An optimization model
for the design of a capacitated multi-product reverse logistics network with
uncertainty. European Journal of Operational Research, 179, 10631077.
Schultmann, F., Engels, B., & Rentz, O. (2003). Closed-loop supply chains for spent
batteries. Interfaces, 33, 5771.
Schulz, E. P., Diaz, M. S., & Bandoni, J. A. (2005). Supply chain optimization of largescale continuous processes. Computers & Chemical Engineering, 29, 13051316.
Shah, N. (2004). Pharmaceutical supply chains: Key issues and strategies for optimisation. Computers & Chemical Engineering, 28, 929941.
Shah, N. (2005). Process industry supply chains: Advances and challenges. Computers
& Chemical Engineering, 29, 12251235.
Shapiro, J. F. (2001). Modeling the supply chain. Duxbury Press.
Shapiro, J. F. (2004). Challenges of strategic supply chain planning and modeling.
Computers & Chemical Engineering, 28, 855861.
Shih, L. H. (2001). Reverse logistics system planning for recycling electrical appliances and computers in Taiwan. Resources Conservation and Recycling, 32, 5572.
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (1999). Designing and managing the
supply chain: Concepts, strategies, and cases. McGraw-Hill.
Sousa, R., Shah, N., & Papageorgiou, L. G. (2008). Supply chain design and multilevel planningAn industrial case. Computers & Chemical Engineering, 32, 2643
2663.
Sousa, R. T., Shah, N., & Papageorgiou, L. G. (2005). Global supply chain network
optimisation for pharmaceuticals. In 15th European symposium on computer aided
process engineering (ESCAPE-15) Barcelona, Spain, (pp. 11891194).
Soylu, A., Oruc, C., Turkay, M., Fujita, K., & Asakura, T. (2006). Synergy analysis of
collaborative supply chain management in energy systems using multi-period
MILP. European Journal of Operational Research, 174, 387403.

Timpe, C. H., & Kallrath, J. (2000). Optimal planning in large multi-site production
networks. European Journal of Operational Research, 126, 422435.
Tsiakis, P., & Papageorgiou, L. G. (2008). Optimal production allocation and distribution supply chain networks. International Journal of Production Economics, 111,
468483.
Tsiakis, P., Shah, N., & Pantelides, C. C. (2001). Design of multi-echelon supply
chain networks under demand uncertainty. Industrial & Engineering Chemistry
Research, 40, 35853604.
Turkay, M., Oruc, C., Fujita, K., & Asakura, T. (2004). Multi-company collaborative
supply chain management with economical and environmental considerations.
Computers & Chemical Engineering, 28, 985992.
van den Heever, S. A., & Grossmann, I. E. (2003). A strategy for the integration of
production planning and reactive scheduling in the optimization of a hydrogen
supply network. Computers & Chemical Engineering, 27, 18131839.
van Hoek, R. I. (1998). Measuring the unmeasurableMeasuring and improving the
performance in the supply chain. Supply Chain Management, 3, 187192.
Varma, V. A., Reklaitis, G. V., Blau, G. E., & Pekny, J. F. (2007). Enterprise-wide modeling
& optimizationAn overview of emerging research challenges and opportunities. Computers & Chemical Engineering, 31, 692711.
Vidal, C. J., & Goetschalckx, M. (1997). Strategic productiondistribution models: A
critical review with emphasis on global supply chain models. European Journal
of Operational Research, 98, 118.
Vidal, C. J., & Goetschalckx, M. (2001). A global supply chain model with transfer pricing and transportation cost allocation. European Journal of Operational Research,
129, 134158.
Voudouris, V. T. (1996). Mathematical programming techniques to debottleneck the
supply chain of ne chemical industries. Computers & Chemical Engineering, 20,
S1269S1274.
Wilkinson, S. J., Cortier, A., Shah, N., & Pantelides, C. C. (1996). Integrated production and distribution scheduling on a Europe-wide basis. Computers & Chemical
Engineering, 20, S1275S1280.
Wu, D., & Ierapetritou, M. (2007). Hierarchical approach for production planning
and scheduling under uncertainty. Chemical Engineering and Processing, 46,
11291140.
Yi, G., & Reklaitis, G. V. (2007). Optimal design of batch-storage network considering
exchange rates and taxes. AIChE Journal, 53, 12111231.
You, F., & Grossmann, I. E. (2008). Optimal design and operational planning of responsive process supply chains. In L. G. Papageorgiou, & M. C. Georgiadis (Eds.), Supply
chain optimization: Part I (pp. 107134). Weinheim: Wiley-VCH.
Zhou, Z. Y., Cheng, S. W., & Hua, B. (2000). Supply chain optimization of continuous process industries with sustainability considerations. Computers & Chemical
Engineering, 24, 11511158.