Facility location for a closed-loop distribution network: a hybrid approach

Abstract

Purpose The purpose of this paper is to find a sustainable facility location solution for a closed-loop distribution network in the uncertain environment created by of high levels of product returns from online retailing coupled with growing pressure to reduce carbon emissions. Design/methodology/approach A case study approach attempts to optimize the distribution centre (DC) location decision for single and double hub scenarios. A hybrid approach combining centre of gravity and mixed integer programming is established for the un-capacitated multiple allocation facility location problem. Empirical data from a major national UK retail distributor network is used to validate the model. Findings The paper develops a contemporary model that can take into account multiple factors (e.g. operational and transportation costs and supply chain (SC) risks) while improving performance on environmental sustainability. Practical implications Based on varying product return rates, SC managers can decide whether to choose a single or a double hub solution to meet their needs. The study recommends a two hub facility location approach to mitigate emergent SC risks and disruptions. Originality/value A two-stage hybrid approach outlines a unique technique to generate candidate locations under twenty-first century conditions for new DCs.