A model and methodologies for the location problem with logistical components
This paper significantly extends traditional facility location models by introducing several logistical cost components such as holding, ordering, and transportation costs in a multi-commodity, multi-location framework. Since location and logistical costs are highly inter-related, the paper provides an integrated model, and seeks to minimize total physical distribution costs by simultaneously determining optimal locations, flows, shipment compositions, and shipment cycle times. Two sophisticated heuristic methodologies, based on Lagrangian relaxation and simulated annealing, respectively, are provided and compared in an extensive computational experiment. Logistics has recently acquired great significance in industry, in part due to the rapidly growing interest in Supply Chain Management. One of the important open issues in logistics is the effective integration of logistical cost components such as transportation cost with facility location models, since the two are highly inter-related in practice. In particular, locations, flows, shipment compositions, and shipment cycle times are highly inter-dependent. The determination of optimal values of these variables is crucial for minimizing physical distribution costs. This paper proposes an integrated locationconsolidation model and provides two sophisticated methodologies to solve the problem. The relative performance of the two methodologies is investigated in an extensive computational experiment.
logistics facility location lagrangian relaxation simulated annealing