Multi-source facility location-allocation and inventory problem

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ejor.2010.06.006 Byline: Zhishuang Yao (a), Loo Hay Lee (a), Wikrom Jaruphongsa (b), Vicky Tan (c), Chen Fei Hui (c) Keywords: Location; Inventory holding cost; Multiple sources; Heuristic method Abstract: We consider a joint facility location-allocation and inventory problem that incorporates multiple sources of warehouses. The problem is motivated by a real situation faced by a multinational applied chemistry company. In this problem, multiple products are produced in several plants. Warehouse can be replenished by several plants together because of capabilities and capacities of plants. Each customer in this problem has stochastic demand and certain amount of safety stock must be maintained in warehouses so as to achieve certain customer service level. The problem is to determine number and locations of warehouses, allocation of customers demand and inventory levels of warehouses. The objective is to minimize the expected total cost with the satisfaction of desired demand weighted average customer lead time and desired cycle service level. The problem is formulated as a mixed integer nonlinear programming model. Utilizing approximation and transformation techniques, we develop an iterative heuristic method for the problem. An experiment study shows that the proposed procedure performs well in comparison with a lower bound. Author Affiliation: (a) Department of Industrial and Systems Engineering, National University of Singapore, 10 Kent Ridge Crescent, Singapore 119260, Singapore (b) Sasin Graduate Institute of Business Administration of Chulalongkorn University, Pathumwan, Bangkok 10330, Thailand (c) Solutia Singapore Pte., Ltd., 101 Thomson Rd. #19-01/03, United Square, Singapore 307591, Singapore Article History: Received 13 May 2009; Accepted 7 June 2010