Location-inventory and shipment decisions in an integrated distribution system: an efficient heuristic solution

Abstract

Distribution network design is the most important strategic issue in supply chain management. In all the studies carried out in this area, materials always move from one level to the next, while in the flexible distribution system, materials flow between facilities in the same level (lateral transshipment). The purpose of this study is to consider the impact of lateral transshipment issues into location, allocation and inventory decisions of distribution centres located in the same level. The model was developed as a nonlinear mixed integer programming model and solved using memetic algorithm. To evaluate the performance of the proposed algorithm in the large-scale competitive logistics system, the lower bound was provided by LP relaxation method. Finally, the effects of lateral transshipment on system costs, safety stock and warehouse load ratio index were considered. Results show that lateral transshipment may improve supply performance. [Received 13 August 2012; Revised 31 May 2013; Revised 10 August 2013; Revised 12 February 2014; Accepted 15 June 2014]