Journal
EUROPEAN JOURNAL OF OPERATIONAL RESEARCH
Volume 207, Issue 2, Pages 750-762Publisher
ELSEVIER
DOI: 10.1016/j.ejor.2010.06.006
Keywords
Location; Inventory holding cost; Multiple sources; Heuristic method
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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. (C) 2010 Elsevier By. All rights reserved.
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