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 π π πππ = πΆππ + π=1 π=1 S.t. π π=1 πππ=ππ ∀π π π=1 πππ=π·π ∀π Ui<=Qi Sij>=0 Ui>=0 π πΉπ π=1 What is cost? • Fi(Ui) is the operating cost. – Includes both fixed and variable cost