Abstract
Distribution network design as a strategic decision has long-term effect on tactical and operational supply chain management. In this research, the location–allocation problem is studied under demand uncertainty. The purposes of this study were to specify the optimal number and location of distribution centers and to determine the allocation of customer demands to distribution centers. The main feature of this research is solving the model with unknown demand function which is suitable with the real-world problems. To consider the uncertainty, a set of possible scenarios for customer demands is created based on the Monte Carlo simulation. The coefficient of variation of costs is mentioned as a measure of risk and the most stable structure for firm’s distribution network is defined based on the concept of robust optimization. The best structure is identified using genetic algorithms and 14 % reduction in total supply chain costs is the outcome. Moreover, it imposes the least cost variation created by fluctuation in customer demands (such as epidemic diseases outbreak in some areas of the country) to the logistical system. It is noteworthy that this research is done in one of the largest pharmaceutical distribution firms in Iran.
Highlights
A supply chain is a set of facilities, suppliers, customers, products and methods of purchasing, monitoring inventory and distribution
To consider the uncertainty in customer demands, some scenarios are created based on Monte Carlo simulation
The questions which are raised in this paper are how the optimal number of distribution centers should be determined, where distribution centers should be established and which customers must be assigned to each distribution center
Summary
A supply chain is a set of facilities, suppliers, customers, products and methods of purchasing, monitoring inventory and distribution. The flow of goods between suppliers and customers goes across several stages and each stage may include some facilities (Sabri and Beamon 2000). Distribution networks are considered as the main profitability key because they directly affect both the cost of supply chains and satisfaction of the customers (Chopra 2003). It seems essential to design a supply chain network which performs well with some parameters variation across time (Santosa 2003). Chain design includes Strategic decisions such as determining the number and location and capacity of facilities in each echelon of the supply chain.
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