Designing Supply Chains via locating knapsacks in a business-to-business environment.

Abstract

In this work we analyse the way a manufacturer’s fixed-costs should be allocated to each production order rather than the way they are currently allocated. Using that information, we introduce a facility location model where fixed-costs are incurred when opening a facility; time-knapsacks representing production lines are assigned to the facility, adding another layer of fixed-costs; and finally, production orders are allocated to knapsacks with corresponding variable costs. Using a real situation, resulting solutions have higher capacity utilisation, smaller and fewer facilities than current network design. Serving demand from closest facility is also less frequent.