Logistics Village Location with Capacity Planning Problem, an MILP Model Approach

Abstract

The optimal location for establishing logistics centers is of great importance in reducing logistics costs and improving supply chain efficiency. This paper aims to provide a conceptual framework for finding the optimal location and capacity for a logistics village establishment using mixed-integer linear programming (MILP). The proposed model is applied on Qazvin province, Iran, as a developing country with a strategic location in international transport corridors. Unlike previous research, the proposed approach considers various logistics operations such as warehousing, refrigeration, sorting, and packaging, along with their capacities as distinct decision variables. The study area is divided into 6972 blocks of 1.5 × 1.5 km, of which 59% are infeasible and excluded due to environmental and natural hazard constraints. The MILP model is then applied in the GAMS for each feasible block to identify the best alternatives for the logistic village establishment with maximum total profit. Based on the results, total freight imported to Qazvin province is directly transferred to their final destinations without visiting the logistics village, while around 98% of exports of Qazvin province would first enter the logistics village to get a service before delivering to customers.