A Simultaneous Inventory Control and Facility Location Model with Stochastic Capacity Constraints
Pablo Miranda () and
Rodrigo Garrido ()
Networks and Spatial Economics, 2006, vol. 6, issue 1, 39-53
Traditionally, logistics analysts divide decisions levels into strategic, tactical and operational. Often these levels are considered separately for modeling purposes. The latter may conduce to make non-optimal decisions, since in reality there is interaction between the different levels. In this research, a cross-level model is derived to analyze decisions about inventory control and facility location, specially suited to urban settings, where the storage space is scarce and the vehicles’ capacity is usually restricted. Both conditions, on the one hand make the problem difficult to solve optimally but on the other hand make it more realistic and useful in practice. This paper presents a simultaneous nonlinear-mixed-integer model of inventory control and facility location decisions, which considers two novel capacity constraints. The first constraint states a maximum lot size for the incoming orders to each warehouse, and the second constraint is a stochastic bound to inventory capacity. This model is NP-Hard and presents nonlinear terms in the objective function and a nonlinear constraint. A heuristic solution approach is introduced, based on Lagrangian relaxation and the subgradient method. Numerical experiments were designed and applied. The solution procedure presented good performance in terms of the objective function. One of the key conclusions of the proposed modeling approach is the fact that a reduction of the inventory capacity does not necessarily imply an increase in the number of installed warehouses. In fact, reducing the order size allows the optimal allocation of customers (those with higher variances) into different warehouses, reducing the total system’s cost. Copyright Springer Science + Business Media, LLC 2006
Keywords: Inventory; Facilities location; Chance constrained programming; Lagrangian relaxation (search for similar items in EconPapers)
References: View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:netspa:v:6:y:2006:i:1:p:39-53
Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11067/PS2
Access Statistics for this article
Networks and Spatial Economics is currently edited by Terry L. Friesz
More articles in Networks and Spatial Economics from Springer
Bibliographic data for series maintained by Sonal Shukla ().