A Facility Location Problem for the Design of a Collaborative Distribution Network

Abstract

This paper deals with the location of intermediate facilities in a two-tiered collaborative distribution network. We consider horizontal collaboration in a geographical cluster of suppliers, with thousands of customers spread over the whole country. The distribution system includes one consolidation facility in the production area and a set of intermediate facilities called regional distribution centers (RDCs). It combines full truckload (FTL) routes between the production area and the RDCs and less-than-truckload (LTL) shipments from the RDCs to each customer. We propose a Mixed Integer Linear Programming formulation for the optimal location of RDCs. This model integrates the two transportation rate structures and enables direct deliveries from the production area to customers when FTL routes are not profitable.