Redesigning a three-echelon logistics network over multiple time periods with transportation mode selection and outsourcing opportunities

M. J. Cortinhal, M. J. Lopes and M. T. Melo

No 7, Technical Reports on Logistics of the Saarland Business School from Saarland University of Applied Sciences (htw saar), Saarland Business School

Abstract: We address the problem of designing/redesigning a multi-echelon logistics network over a multi-period planning horizon. Strategic decisions comprise opening new plants and warehouses at candidate sites and selecting their capacities from a set of available discrete sizes. Capacity expansion may occur more than once over the time horizon both at new locations and at existing facilities. Capacity contraction is a viable option as well that involves closing existing plants and/or warehouses. The operation of the network is also subject to logistics decisions involving supplier selection in conjunction with procurement, production, and distribution of multiple products. Distribution channels are to be identified in each time period as well as the modes of transportation for raw materials and end products. Finally, a strategic choice between in-house manufacturing and a mixed approach with product outsourcing is to be taken. We propose a mixed-integer linear programming model and develop several valid inequalities to enhance the original formulation. To gain insight into the complexity of the problem at hand, an extensive computational study is performed with randomly generated instances that are solved with standard mathematical optimization software. Useful managerial insights are derived from varying several parameters and analyzing the impact of different business strategies on various segments of the logistics network.

Keywords: logistics network design/re-design; multiple periods; transportation mode selection; product outsourcing; mixed-integer linear programming (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cmp, nep-net and nep-tre
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