Abstract
Location model with risk pooling and mode selection problems are integrated in this paper. Specifically, we consider a supply chain consisting of one supplier, distribution centres, transient points, and retailers who observe random demand that follows a certain probability distribution. Supplier dispatches the product to distribution centres using one mode of transportation while a given distribution centre may serve a retailer directly using one mode of transportation or through a transient point using two modes of transportation. The model is expected to determine facility location decisions, inventory decisions, and intermodal transportation decisions. The set of retailers who are assigned to a particular distribution centre are not known a priori. The derived model is large-scale and non-linear mixed integer programme. The difficulty of the model is reduced by adding a redundant constraint which made the solution procedure attainable. Also, Lagrangian relaxation approach is used to develop lower and upper limits on the optimal solution.
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