This example shows how to determine the optimum amount of gasoline to transport between different levels of a gasoline supply chain. The objective is to minimize the total cost, which includes transportation costs and inventory holding costs at various points in the supply chain. It is also important to minimize stockouts at various retail outlets. The complexity of the problem arises from the fact that there is stochastic (variable) production at the refinery level and stochastic demand at the retail outlet level.
The following sections describe this problem and its OptQuest solution: