Question: Please rewrite the following in at least 250 words Most existing network design and facility loca…

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Jun 13, 2022

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Question: Please rewrite the following in at least 250 words Most existing network design and facility loca…

by | Jun 13, 2022 | Questions & Answers


Please rewrite the following in at least 250
words

Most existing network design and facility location models have
focused on the trade-off between the fixed costs of locating
facilities and variable transportation costs between facilities and
customers. However, operational performance measures such as
service levels and lead times are what motivates customers to bring
business to a company and should be considered in the design of a
distribution network. While some previous work has considered lead
times and safety stocks separately, they are closely related in
practice, since safety stocks are often set relative to the
distribution of demand over the lead time. In this paper we
consider a two-stage supply chain with a production facility that
replenishes a single product at retailers. The objective is to
locate Distribution Centers (DCs) in the network such that the sum
of the location and inventory (pipeline and safety stock) costs is
minimized. The replenishment lead time at the DCs depends on the
volume of flow through the DC. We require the DCs to carry enough
safety stock to maintain the prescribed service levels at the
retailers they serve. The explicit modeling of the relationship
between the flows in the network, lead times and safety stocks
allows us to capture the trade-off between them. We develop a
Lagrangian heuristic to obtain near-optimal solutions with
reasonable computational requirements for large problem
instances.

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