Multi-Period Inventory Management Optimization Using Integer Linear Programming: A Case Study on Plywood Distribution

In the Philippines, plywood distributors heavily rely on inventory to maintain their relevance in the saturated market. Specifically, this paper focuses on the inventory management of a secondary plywood wholesaler who sources from a local supplier and whose clients are primarily small-time construction material retailers. To this end, an integer linear programming (ILP) approach is proposed with the aim to maximize net profit by determining the optimal monthly reorder quantities of each product. First, seasonal demand forecasts are made based on the wholesaler’s 3-year monthly sales volume data. Next, the ILP model is developed wherein the objective of the study is realized by the total gross profit less the total overhead costs. Subsequently, the model takes into account several constraints namely, monthly forecasted demands, crate capacities, storage capacity, trucking service capacity, and customer delivery truck. Finally, the ILP model is implemented using MATLAB to find the optimal monthly inventory and reorder quantity.