TRUMPF Uses a Mixed Integer Model as Decision Support for Strategic Production Network Design

AbstractTo examine the effects of product reallocations within the TRUMPF production network, the authors developed a mixed integer linear programming model of the firm’s network. This model permits both scenario analysis and optimization.TRUMPF, a German owner-managed supplier of high-technology machinery, has experienced rapid growth over the past 15 years and expanded into a globally competitive firm with a complex production network. The company wanted to examine the effects of product reallocations within its production network on overall network costs, because it anticipated that its historically evolved structure was in need of revision. To support the company in doing so, we built a mixed integer linear programming model depicting large parts of the firm’s production network. The model allows for a combination of scenario analysis and optimization. We first used optimization to calculate a theoretical reference scenario. Subsequently, we used the model’s results to evaluate various alternative feasible scenarios. Overall, this modeling informed a strategic decision concerning the future network design. Furthermore, it guided planners through the decision-making process in a systematic manner, deepening their understanding of crucial cost factors.