Establishing a network of warehouses for finished products, taking into account seasonal fluctuations in demand

Abstract

When products are to be distributed, it may be more advantageous, from the point of view of total costs, to make use of warehouses instead of supplying direct from the production points, as warehouses can take in considerable quantities which are transported relatively cheaply. We intend to determine number and location of warehouses to be established in such a way that the sum of the costs of large-scale transport (from point of production to warehouse), of passing through the warehouse and if terminal transport is minimized, taking into account seasonal fluctuations in demand. The method we are presenting below has been developed for and applied to research related to a network or oil products. Based on a branch and bound algorithm, the method we have followed leads to efficient heuristics if the problem that confronts us is a large scale one.