9. Three-Echelon Supply Chain Modeling

Up to this point, we’ve considered only a two-echelon supply chain—a facility and the customers it services. You have seen how optimizing the two-echelon supply chain can address many types of problems. However, by adding an echelon, we can capture yet another important trade-off in supply chain modeling: Should your facilities be closer to the source of the product or to the destination?

One type of three-echelon supply chain may include a set of plants or suppliers that ship to warehouses, and then the warehouses, in turn, ship to customers. Alternatively, we may consider a supply chain in which a group of raw material suppliers ships to a plant, and the plant then ships to the customers. In fact, after ...

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