A relax-and-restrict matheuristic for supply chain network design with facility location and customer due date flexibility

Abstract

In this paper, we study a supply chain network design problem that takes into account several real-world features. Focusing on the growing use of third-party warehouse services, the paper discusses the creation of a network that can adjust to the needs of businesses to enhance operational flexibility and resource utilization. Moreover, it addresses the challenge of delivery date flexibility where the conventional single-day delivery is replaced with a range of possible delivery dates. Considering these two types of flexibility, we formulate a supply chain network design problem that includes all production, inventory, location, and distribution decisions. We propose a solution approach called the relax-and-restrict matheuristic. This approach iteratively solves three versions of the model: two relaxed versions and a restricted one. Through a series of computational experiments, we highlight the efficiency of the proposed method. Furthermore, managerial insights are presented on the role of flexibility in supply chain network design and how it relates to economies of scale. The results demonstrate how synergistic effects between two types of flexibility improve logistics performance by achieving cost-effectiveness.