An optimisation framework of a global supply chain considering transfer pricing for a Colombian multinational company

This paper considers the problem of designing a global supply chain of consumer products by considering transfer pricing. It is based on a global established supply chain for which the central problem is to determine the closure and consolidation of national distribution centres. The problem has been solved by using a mixed integer linear programming model considering decisions regarding the location of facilities, transfer pricing, plant capacities, and the flow of products through the supply chain. The objective function of the proposed mathematical model is to maximise the total profit after tax by considering the determination of global revenues in the different facilities and their division over the chain. The mathematical model has been tested with real information obtained from a Colombian multinational company of the commercial sector. The obtained results confirm the efficiency of the proposed model by including transfer pricing and the positive impact on the determination of the profits of the case study company.