Journal
IEEE TRANSACTIONS ON AUTOMATION SCIENCE AND ENGINEERING
Volume 5, Issue 4, Pages 597-608Publisher
IEEE-INST ELECTRICAL ELECTRONICS ENGINEERS INC
DOI: 10.1109/TASE.2008.917156
Keywords
Facility location; Lagrangian relaxation; optimization; supply chain design
Categories
Funding
- Luxembourg Ministry of High Education and Research-Department of Science [03/88]
- European Community Research Program
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This paper addresses the design of single commodity stochastic distribution networks. The distribution network under consideration consists of a single supplier serving a set of retailers through a set of distribution centers (DCs). The number and location of DCs are decision variables and they are chosen from the set of retailer locations. To manage inventory at DCs, the economic order quantity (EOQ) policy is used by each DC, and a safety stock level is kept to ensure a given retailer service level. Each retailer faces a random demand of a single commodity and the supply lead time from the supplier to each DC is random. The goal is to minimize the total location, shipment, and inventory costs, while ensuring a given retailer service level. The introduction of inventory costs and safety stock costs leads to a nonlinear NP-hard optimization problem. A Lagrangian relaxation approach is proposed. Computational results are presented and analyzed showing the effectiveness of the proposed approach.
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