IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v285y2020i1p279-295.html
   My bibliography  Save this article

Integrated location and inventory planning in service parts logistics with customer-based service levels

Author

Listed:
  • Candas, Mehmet Ferhat
  • Kutanoglu, Erhan

Abstract

We analyze the integrated logistics network design and inventory stocking problem in service parts logistics, where each customer requires a certain response time-based service level. We introduce a non-linear mixed integer optimization model that explicitly captures the interdependency between network design (locating facilities, and allocating customers’ demands to facilities) and inventory stocking decisions (stock levels and their corresponding stochastic fill rates). We then provide two different linearized mixed integer formulations for this problem that can solve small and medium size problems. We show that it is still a challenging problem in general, for which we have a Lagrangian-relaxation based approach that provides extremely tight lower and upper bounds. Our extensive computational study shows the effectiveness of the proposed approach for a variety of problem instances, producing provably near-optimal integrated solutions.

Suggested Citation

  • Candas, Mehmet Ferhat & Kutanoglu, Erhan, 2020. "Integrated location and inventory planning in service parts logistics with customer-based service levels," European Journal of Operational Research, Elsevier, vol. 285(1), pages 279-295.
    • Handle: RePEc:eee:ejores:v:285:y:2020:i:1:p:279-295
    DOI: 10.1016/j.ejor.2020.01.058
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221720300965
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2020.01.058?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Morris A. Cohen & Paul R. Kleindorfer & Hau L. Lee, 1988. "Service Constrained (s, S) Inventory Systems with Priority Demand Classes and Lost Sales," Management Science, INFORMS, vol. 34(4), pages 482-499, April.
    2. Oguzhan Vicil & Peter Jackson, 2016. "Computationally efficient optimization of stock pooling and allocation levels for two-demand-classes under general lead time distributions," IISE Transactions, Taylor & Francis Journals, vol. 48(10), pages 955-974, October.
    3. Mark Daskin & Collette Coullard & Zuo-Jun Shen, 2002. "An Inventory-Location Model: Formulation, Solution Algorithm and Computational Results," Annals of Operations Research, Springer, vol. 110(1), pages 83-106, February.
    4. Amy Cohn & Cynthia Barnhart, 2006. "Composite-variable modeling for service parts logistics," Annals of Operations Research, Springer, vol. 145(1), pages 383-383, July.
    5. Amy Cohn, 2006. "Composite-variable modeling for service parts logistics," Annals of Operations Research, Springer, vol. 144(1), pages 17-32, April.
    6. Vishv Jeet & Erhan Kutanoglu & Amit Partani, 2009. "Logistics network design with inventory stocking for low-demand parts: Modeling and optimization," IISE Transactions, Taylor & Francis Journals, vol. 41(5), pages 389-407.
    7. Ho‐Yin Mak & Zuo‐Jun Max Shen, 2009. "A two‐echelon inventory‐location problem with service considerations," Naval Research Logistics (NRL), John Wiley & Sons, vol. 56(8), pages 730-744, December.
    8. Morris A. Cohen & Yu-Sheng Zheng & Yunzeng Wang, 1999. "Identifying Opportunities for Improving Teradyne's Service-Parts Logistics System," Interfaces, INFORMS, vol. 29(4), pages 1-18, August.
    9. Topan, Engin & Bayındır, Z. Pelin & Tan, Tarkan, 2017. "Heuristics for multi-item two-echelon spare parts inventory control subject to aggregate and individual service measures," European Journal of Operational Research, Elsevier, vol. 256(1), pages 126-138.
    10. Jeet, Vishv & Kutanoglu, Erhan, 2018. "Part commonality effects on integrated network design and inventory models for low-demand service parts logistics systems," International Journal of Production Economics, Elsevier, vol. 206(C), pages 46-58.
    11. Zuo-Jun Max Shen & Mark S. Daskin, 2005. "Trade-offs Between Customer Service and Cost in Integrated Supply Chain Design," Manufacturing & Service Operations Management, INFORMS, vol. 7(3), pages 188-207, September.
    12. Nozick, Linda K. & Turnquist, Mark A., 1998. "Integrating inventory impacts into a fixed-charge model for locating distribution centers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 34(3), pages 173-186, September.
    13. Miranda, Pablo A. & Garrido, Rodrigo A., 2004. "Incorporating inventory control decisions into a strategic distribution network design model with stochastic demand," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 40(3), pages 183-207, May.
    14. Alper Atamtürk & Gemma Berenguer & Zuo-Jun (Max) Shen, 2012. "A Conic Integer Programming Approach to Stochastic Joint Location-Inventory Problems," Operations Research, INFORMS, vol. 60(2), pages 366-381, April.
    15. Rustenburg, W. D. & van Houtum, G. J. & Zijm, W. H. M., 2001. "Spare parts management at complex technology-based organizations: An agenda for research," International Journal of Production Economics, Elsevier, vol. 71(1-3), pages 177-193, May.
    16. Zuo-Jun Max Shen & Collette Coullard & Mark S. Daskin, 2003. "A Joint Location-Inventory Model," Transportation Science, INFORMS, vol. 37(1), pages 40-55, February.
    17. Kamran Moinzadeh & Hau L. Lee, 1986. "Batch Size and Stocking Levels in Multi-Echelon Repairable Systems," Management Science, INFORMS, vol. 32(12), pages 1567-1581, December.
    18. Alper Şen & Deepak Bhatia & Koray Doğan, 2010. "Applied Materials Uses Operations Research to Design Its Service and Parts Network," Interfaces, INFORMS, vol. 40(4), pages 253-266, August.
    19. Nozick, L. K., 2001. "The fixed charge facility location problem with coverage restrictions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 37(4), pages 281-296, August.
    20. Rappold, James A. & Van Roo, Ben D., 2009. "Designing multi-echelon service parts networks with finite repair capacity," European Journal of Operational Research, Elsevier, vol. 199(3), pages 781-792, December.
    21. Morris Cohen & Pasumarti V. Kamesam & Paul Kleindorfer & Hau Lee & Armen Tekerian, 1990. "Optimizer: IBM's Multi-Echelon Inventory System for Managing Service Logistics," Interfaces, INFORMS, vol. 20(1), pages 65-82, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sina Nayeri & Mahdieh Tavakoli & Mehrab Tanhaeean & Fariborz Jolai, 2022. "A robust fuzzy stochastic model for the responsive-resilient inventory-location problem: comparison of metaheuristic algorithms," Annals of Operations Research, Springer, vol. 315(2), pages 1895-1935, August.
    2. Fathi, Mahdi & Khakifirooz, Marzieh & Diabat, Ali & Chen, Huangen, 2021. "An integrated queuing-stochastic optimization hybrid Genetic Algorithm for a location-inventory supply chain network," International Journal of Production Economics, Elsevier, vol. 237(C).
    3. Somarin, Aghil Rezaei & Sharma, Pankaj & Tiwari, Sunil & Chen, Songlin, 2023. "Stock reallocation policy for repairable service parts in case of supply disruptions due to extreme weather events," International Journal of Production Economics, Elsevier, vol. 256(C).
    4. Morteza Noruzi & Ali Naderan & Jabbar Ali Zakeri & Kamran Rahimov, 2023. "A Novel Decision-Making Framework to Evaluate Rail Transport Development Projects Considering Sustainability under Uncertainty," Sustainability, MDPI, vol. 15(17), pages 1-26, August.
    5. Loske, Dominic & Klumpp, Matthias, 2021. "Human-AI collaboration in route planning: An empirical efficiency-based analysis in retail logistics," International Journal of Production Economics, Elsevier, vol. 241(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aaron Guerrero Campanur & Elias Olivares-Benitez & Pablo A. Miranda & Rodolfo Eleazar Perez-Loaiza & Jose Humberto Ablanedo-Rosas, 2018. "Design of a Logistics Nonlinear System for a Complex, Multiechelon, Supply Chain Network with Uncertain Demands," Complexity, Hindawi, vol. 2018, pages 1-16, November.
    2. Jeet, Vishv & Kutanoglu, Erhan, 2018. "Part commonality effects on integrated network design and inventory models for low-demand service parts logistics systems," International Journal of Production Economics, Elsevier, vol. 206(C), pages 46-58.
    3. Pablo Miranda & Rodrigo Garrido, 2006. "A Simultaneous Inventory Control and Facility Location Model with Stochastic Capacity Constraints," Networks and Spatial Economics, Springer, vol. 6(1), pages 39-53, March.
    4. Darmawan, Agus & Wong, Hartanto & Thorstenson, Anders, 2021. "Supply chain network design with coordinated inventory control," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).
    5. Wenjun Ni & Jia Shu & Miao Song & Dachuan Xu & Kaike Zhang, 2021. "A Branch-and-Price Algorithm for Facility Location with General Facility Cost Functions," INFORMS Journal on Computing, INFORMS, vol. 33(1), pages 86-104, January.
    6. Burcu B. Keskin & Halit Üster, 2012. "Production/distribution system design with inventory considerations," Naval Research Logistics (NRL), John Wiley & Sons, vol. 59(2), pages 172-195, March.
    7. Escalona, P. & Ordóñez, F. & Marianov, V., 2015. "Joint location-inventory problem with differentiated service levels using critical level policy," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 83(C), pages 141-157.
    8. Valerie Tardif & Sridhar Tayur & James Reardon & Reid Stines & Pete Zimmerman, 2010. "OR Practice---Implementing Seasonal Logistics Tactics for Finished Goods Distribution at Deere & Company's C&CE Division," Operations Research, INFORMS, vol. 58(1), pages 1-15, February.
    9. Puntipa Punyim & Ampol Karoonsoontawong & Avinash Unnikrishnan & Chi Xie, 2018. "Tabu Search Heuristic for Joint Location-Inventory Problem with Stochastic Inventory Capacity and Practicality Constraints," Networks and Spatial Economics, Springer, vol. 18(1), pages 51-84, March.
    10. Roberto León & Pablo A. Miranda-Gonzalez & Francisco J. Tapia-Ubeda & Elias Olivares-Benitez, 2024. "An Inventory Service-Level Optimization Problem for a Multi-Warehouse Supply Chain Network with Stochastic Demands," Mathematics, MDPI, vol. 12(16), pages 1-20, August.
    11. Schuster Puga, Matías & Minner, Stefan & Tancrez, Jean-Sébastien, 2019. "Two-stage supply chain design with safety stock placement decisions," International Journal of Production Economics, Elsevier, vol. 209(C), pages 183-193.
    12. Zhang, Zhi-Hai & Unnikrishnan, Avinash, 2016. "A coordinated location-inventory problem in closed-loop supply chain," Transportation Research Part B: Methodological, Elsevier, vol. 89(C), pages 127-148.
    13. Escalona, P. & Marianov, V. & Ordóñez, F. & Stegmaier, R., 2018. "On the effect of inventory policies on distribution network design with several demand classes," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 111(C), pages 229-240.
    14. Emilio Carrizosa & Alba V. Olivares-Nadal & Pepa Ramírez-Cobo, 2020. "Embedding the production policy in location-allocation decisions," 4OR, Springer, vol. 18(3), pages 357-380, September.
    15. Miranda, Pablo A. & Garrido, Rodrigo A., 2009. "Inventory service-level optimization within distribution network design problem," International Journal of Production Economics, Elsevier, vol. 122(1), pages 276-285, November.
    16. Snoeck, André & Winkenbach, Matthias & Fransoo, Jan C., 2023. "On-demand last-mile distribution network design with omnichannel inventory," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 180(C).
    17. Snoeck, André & Winkenbach, Matthias & Fransoo, Jan C., 2023. "On-demand last-mile distribution network design with omnichannel inventory," Other publications TiSEM 83b06c9f-2a65-4aaf-880b-2, Tilburg University, School of Economics and Management.
    18. Mehrdad Shahabi & Shirin Akbarinasaji & Avinash Unnikrishnan & Rachel James, 2013. "Integrated Inventory Control and Facility Location Decisions in a Multi-Echelon Supply Chain Network with Hubs," Networks and Spatial Economics, Springer, vol. 13(4), pages 497-514, December.
    19. Melo, M.T. & Nickel, S. & Saldanha-da-Gama, F., 2009. "Facility location and supply chain management - A review," European Journal of Operational Research, Elsevier, vol. 196(2), pages 401-412, July.
    20. Shu-Hsien Liao & Chia-Lin Hsieh & Yu-Siang Lin, 2011. "A multi-objective evolutionary optimization approach for an integrated location-inventory distribution network problem under vendor-managed inventory systems," Annals of Operations Research, Springer, vol. 186(1), pages 213-229, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:285:y:2020:i:1:p:279-295. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.