Incorporating inventory control decisions into a strategic distribution network design model with stochastic demand

Pablo A. Miranda and Rodrigo A. Garrido

Transportation Research Part E: Logistics and Transportation Review, 2004, vol. 40, issue 3, 183-207

Abstract: In this paper, we propose a simultaneous approach to incorporate inventory control decisions--such as economic order quantity and safety stock decisions--into typical facility location models, which are used to solve the distribution network design problem. A simultaneous model is developed considering a stochastic demand, modeling also the risk pooling phenomenon. We present a non-linear-mixed-integer model and a heuristic solution approach, based on Lagrangian relaxation and the sub-gradient method. In a numerical application, we found that the potential cost reduction, compared to the traditional approach, increases when the holding costs and/or the variability of demand are higher.

Keywords: Supply; chain; management; Distribution; network; design; Facility; location; problems; Inventory; control; Risk; pooling; Lagrangian; relaxation (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (61)

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