Product allocation to different types of distribution center in retail logistics networks

Andreas Holzapfel, Heinrich Kuhn and Michael G. Sternbeck

European Journal of Operational Research, 2018, vol. 264, issue 3, 948-966

Abstract: We consider the problem of assigning stockkeeping units to distribution centers (DCs) belonging to different DC types of a retail network, e.g., central, regional, and local DCs. The problem is motivated by the real situation of a retail company and solved by an MIP solution approach. The MIP model reflects the interdependencies between inbound transportation, outbound transportation and instore logistics as well as capital tied up in inventories and differences in picking costs between the warehouses. A novel solution approach is developed and applied to a real-life case of a leading European grocery retail chain. The application of the new approach results in cost savings of 6% of total operational costs compared to the present assignment. These savings amount to several million euros per year. In-depth analyses of the results and sensitivity analyses provide insights into the solution structure and the major related issues.

Keywords: Retail distribution; Transportation; Inventory; Instore logistics; Discrete optimization (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:264:y:2018:i:3:p:948-966

DOI: 10.1016/j.ejor.2016.09.013

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