Problem Statement
Matching demand and supply in the Dairy industry is particularly challenging. It is not the typical backward propagation of demand through the echelons and processes in the supply chain, towards raw materials and suppliers. Because some supply components (e.g. raw milk) are fixed, companies need to decide with which ingredients to supply their demand, as there are options in the conversion of the milk to the final product.
The optimal solution should take into account machine and human asset capacity constraints, multi-level BOM selections tied to processes and assets, yields and losses, shelf life and profit maximization – to not utilize higher grade ingredients for lower profit products.
Solution Statement
A Sophus model handles all the abovementioned complexity and defines how the profitability of the raw material to finished good conversion can be maximized. As a result, you know – across your planning horizon and on a daily basis – which amount of which finished product to produce, with which BOMs to get there, how much of which raw material will be used in the process and if (and how much) load-off products you have to produce to use up the raw material.
Finally, the presented solution is feasible, as it adheres to all realities constraining your supply chain, such as lead times, product expiration dates and resource capacity limits.
