Yao Zhao

Assistant Professor

MSIS Department

Rutgers Business School

Title: Integrating Inventory Planning with Project Management in Project-Driven Supply Chains

Abstract:

Most real-world projects require material supplies at various stages. This is true especially for capital intensive projects, such as customized machineries built in a make-to-order/build-to-order fashion, construction and product development projects. In this paper, we present a modeling paradigm to help firms make material supply decisions and project decisions jointly. Material supply decisions (e.g., inventory positioning) and project decisions (e.g., resource planning, project scheduling) are intertwined in these project-driven supply chains (PDSCs). However, material supply management and project management are typically carried out separately in practice and studied in isolation in the literature.

We model a PDSC by a combined network of material supplies and project activities facing random demand for projects, where the material availability constrains the starting times of project activities.

We develop a mathematic programming model to optimize inventory levels, activity durations and project schedule simultaneously, so as to optimally strike the balance between inventory cost and project cost (expediting cost, delay penalty). For tree structure networks, we develop an optimization algorithm based on dynamic programming.

Using examples, we demonstrate that isolated project planning/scheduling that ignores material supplies can lead to significant loss as compared to the joint optimization. Even if the project activities can not be expedited, coordinating the project schedule with stock decisions alone can result in sizable savings.We also discuss how the savings are generated by the joint optimization, and when they are significant.