Abstract
In this paper we develop a generalized framework and a novel methodology to simultaneously optimize locations and design decisions for a set of facilities that are facing competition from pre-existing facilities. The framework encompasses multi-attribute design decisions, an elastic customer demand mechanism that can capture both expansion and cannibalization effects, and a flexible demand allocation mechanism that encompasses both, proportional allocation (“gravity type”) and all-or-nothing models (such as p−median). Many classic location models appear as special cases of our Generalized Facility Location and Design Problem (GFLDP). We present an effective solution methodology, that allows us to approximate exact solutions to GDFLP to pre-selected accuracy levels. Our results show that not combining design and location decisions within a single model can lead to very substantial optimality gaps, thus underscoring the importance of GDFLP approach.
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