Collaborative production planning between supply chain partners by Lagrangian relaxation

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A collaborative planning framework based on the Lagrangian Relaxation was developed to coordinate and optimize the production planning of independent partners in multiple tier supply chains. Linking constraints and dependent demand constraints were added to the monolithic Multi-Level, multi-item Capacitated Lot Sizing Problem (MLCLSP). MLCLSP was Lagrangian relaxed and decomposed into facility-separable subproblems.Surrogate gradient algorithm was used to update Lagrangian multipliers, which coordinate decentralized decisions of the facilities. Production planning of independent partners could be appropriately coordinated and optimized by this framework without intruding their decision authorities and private information. Experimental results show that the proposed coordination mechanism and procedure come close to optimal results as obtained by central coordination.
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