Proceedings of Annual Tokyo Business Research Conference
9 - 10 November 2015, Shinjuku Washington Hotel, Tokyo, Japan, ISBN: 978-1-922069-88-7
Supply Chain Distribution Network Design with Stochastic Demand
Ta-Hui Yang, Chen-Cheng Chen and Ya-Chi Yen
This study addresses the strategic supply chain distribution network design problem for a
single commodity under stochastic demand. The problem is a long-term planning involved
in large capital investment and having long-lasting effects on supply chain operations. The
proposed model considers demand uncertainty, direct shipment and transshipment
deliveries, inventory and replenishment mechanisms, and economies of scale in
transportation costs to reflect the real-world operations. A two-stage stochastic program is
used to formulate the problem. The first stage problem is the strategic decisions and would
not alter due to the stochastic demand. The second stage problem is more tactical
decisions and would change in response to the demand variations. The model aims to
determine: 1) the optimal facility number and locations for the distribution centers; 2) the
best distribution/delivery plan in response to different levels of demand variation; 3) the
best inventory and replenishment mechanisms in response to different levels of demand
variation. Finally, an example was created to test the performance of the proposed model.
Keyword: Supply chain, Distribution network, Stochastic demand, Facility location, Stochastic
programming
Field: Management/Supply Chain Management
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Dr. Ta-Hui Yang, Professor, Department of Logistics Management, National Kaohsiung First University of Science and
Technology, 1University Rd., Kaohsiung, 82445, Taiwan, yang@nkfust.edu.tw
Dr. Chen-Cheng Chen, Assistant Professor, Department of Logistics Management, National Kaohsiung First University
of Science and Technology, 1 University Rd., Kaohsiung, 82445, Taiwan, jjen@nkfust.edu.tw
Miss Ya-Chi Yen, Research Assistant Department of Logistics Management, National Kaohsiung First University of
Science and Technology, 1University Rd., Kaohsiung, 82445, Taiwan, u9923003@nkfust.edu.tw