Designing the logistics network

Facility location decisions Criteria – Demand and locations of the demand – Distribution systems (Rail, ground, air, sea) – Material sources – Energy sources and cost – Labor: qualifications and cost

Location Problems Time Horizon: – Single Period single facility – Multi-period, periodic modifications on the location Facility Typology: – Single kind (RDC or CDC) – Multi kind (RDC and CDC) Material Flow: – Single commodity – Multi commodity Interactions among facilities Dominant material flow: – Inbound material movement is more important – Outbound material movement is more important – Both inbound and outbound material movements are important Demand divisibility – Demand can be acquired from multiple source or single source Influence of transportation on location determination

Modeling and solving location problems Single-echelon single-commodity location models – Facilities to be located are homogeneous – Material flow in and out are negligible – All material flows are homogenous. They are treated a single commodity – Transportation cost is linearly correlated with the amount and concave – Facility operating cost is linear and concave

Mathematical model definition Dj: Demand by customer j Qi: Capacity of a potential facility i Ui: Operations in a facility Sij: amount of product sent from i to j. Cij(Sij): Cost of shipping Sij unit product Fi(Ui): Operation cost at facility i

What is cost? Fi(Ui) is the operating cost. – Includes both fixed and variable cost