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Supply chain design considering economies of scale and transport frequencies

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  • Baumgartner, Kerstin
  • Fuetterer, André
  • Thonemann, Ulrich W.

Abstract

In this paper we consider a 3-echelon, multi-product supply chain design model with economies of scale in transport and warehousing that explicitly takes transport frequencies into consideration. Our model simultaneously optimizes locations and sizes of tank farms, material flows, and transport frequencies within the network. We consider all relevant costs: product cost, transport cost, tank rental cost, tank throughput cost, and inventory cost. The problem is based on a real-life example from a chemical company. We show that considering economies of scale and transport frequencies in the design stage is crucial and failing to do so can lead to substantially higher costs than optimal. We solve a wide variety of problems with branch-and-bound and with the efficient solution heuristics based on iterative linearization techniques we develop. We show that the heuristics are superior to the standard branch-and-bound technique for large problems like the one of the chemical company that motivated our research.

Suggested Citation

  • Baumgartner, Kerstin & Fuetterer, André & Thonemann, Ulrich W., 2012. "Supply chain design considering economies of scale and transport frequencies," European Journal of Operational Research, Elsevier, vol. 218(3), pages 789-800.
    • Handle: RePEc:eee:ejores:v:218:y:2012:i:3:p:789-800
    DOI: 10.1016/j.ejor.2011.11.032
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    Cited by:

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    2. Märkle-Huß, Joscha & Feuerriegel, Stefan & Neumann, Dirk, 2020. "Cost minimization of large-scale infrastructure for electricity generation and transmission," Omega, Elsevier, vol. 96(C).
    3. Ram Kumar P N, 2013. "On Modeling The Step Fixed-Charge Transportation Problem," Working papers 134, Indian Institute of Management Kozhikode.
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    5. Nowak, Maciek & Hewitt, Mike & Bachour, Hussam, 2019. "Mileage bands in freight transportation," European Journal of Operational Research, Elsevier, vol. 272(2), pages 549-564.
    6. Halim, Ronald A. & Kwakkel, Jan H. & Tavasszy, Lóránt A., 2016. "A strategic model of port-hinterland freight distribution networks," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 95(C), pages 368-384.

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