Article2009

A two‐echelon inventory‐location problem with service considerations

50 citations0/0 files storedNaval Research Logistics (NRL)

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Supply Chain and Inventory Management Advanced Manufacturing and Logistics Optimization Facility Location and Emergency Management

Abstract

Abstract We study the problem of designing a two‐echelon spare parts inventory system consisting of a central plant and a number of service centers each serving a set of customers with stochastic demand. Processing and storage capacities at both levels of facilities are limited. The manufacturing process is modeled as a queuing system at the plant. The goal is to optimize the base‐stock levels at both echelons, the location of service centers, and the allocation of customers to centers simultaneously, subject to service constraints. A mixed integer nonlinear programming model (MINLP) is formulated to minimize the total expected cost of the system. The problem is NP‐hard and a Lagrangian heuristic is proposed. We present computational results and discuss the trade‐off between cost and service. © 2009 Wiley Periodicals, Inc. Naval Research Logistics 2009

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References

2006Facility location under uncertainty: a review 1995Network and Discrete Location 1993Material Management in Decentralized Supply Chains 2005Reliability Models for Facility Location: The Expected Failure Cost Case 2003A Joint Location-Inventory Model 2002An Inventory-Location Model: Formulation, Solution Algorithm and Computational Results 1985A Multi-Echelon Inventory Model for a Repairable Item with One-for-One Replenishment 1995Facility Location

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