Designing the logistics network

Facility location decisions

• Criteria– Demand and locations of the demand– Distribution systems (Rail, ground, air, sea)– Material sources– Energy sources and cost– Labor: qualifications and cost

Location Problems• Time Horizon:

– Single Period single facility– Multi-period, periodic modifications on the location

• Facility Typology:– Single kind (RDC or CDC)– Multi kind (RDC and CDC)

• Material Flow:– Single commodity– Multi commodity

• Interactions among facilities• Dominant material flow:

– Inbound material movement is more important– Outbound material movement is more important– Both inbound and outbound material movements are important

• Demand divisibility– Demand can be acquired from multiple source or single source

• Influence of transportation on location determination

Modeling and solving location problems

• Single-echelon single-commodity location models– Facilities to be located are homogeneous– Material flow in and out are negligible– All material flows are homogenous. They are

treated a single commodity– Transportation cost is linearly correlated with the

amount and concave– Facility operating cost is linear and concave

Mathematical model definition

• Dj: Demand by customer j• Qi: Capacity of a potential facility i• Ui: Operations in a facility• Sij: amount of product sent from i to j.• Cij(Sij): Cost of shipping Sij unit product• Fi(Ui): Operation cost at facility i

S.t.

Ui<=QiSij>=0Ui>=0

What is cost?

• Fi(Ui) is the operating cost. – Includes both fixed and variable cost