Integrated supply chain: multi products location routing problem integrated with inventory under stochastic demand

Abstract

When two logistical decisions of the supply chain namely location (a strategic decision) and routing (a tactical decision) are combined, the location- routing problem (LRP) is formed. LRP deals with simultaneously locating one or more supply facility among a set (or sets) of potential facilities and assigning customers to the selected facility (or facilities). To further improve the operation of the supply chain process, it is presented in this dissertation to integrate inventory control, as another tactical decision, with the LRP. The presented model considers the multi-product network under the fixed- interval inventory policy where stochastic demands represent the customers' requirements. Moreover, the third party logistics allows excess space for selected warehouses if needed. A two phase heuristic simulated annealing is presented as solution methodology. Test problems are designed and solved by the developed algorithm to evaluate the presented solution approach. Results show that the integrated decision leads to saving on the network cost. Furthermore, two case studies are discussed to show how the presented model can be used in practice