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The two-warehouse material location selection problem

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  • Wutthisirisart, Phichet
  • Sir, Mustafa Y.
  • Noble, James S.

Abstract

Companies often require additional warehouse space due to increased demand and often the option of building a warehouse is not feasible due to a high investment cost. As a result excess inventory that cannot be stored in owned warehouses is transferred to third-party warehouses for which the company pays rent, as well as incurs labor and transportation costs for storing items and moving items back to the production site. In this situation, the company ends up with two warehouses – owned and rented. This research introduces the material location selection problem that allocates materials to these two warehouses while minimizing the total storage and transportation costs. Four material location models/policies, each with different decision restrictions, are proposed to solve the problem from different material handling perspectives. The four models are analyzed and contrasted with each other based on data derived from a real industrial scenario. The case results show a cost savings opportunity between 20–40% due to reassigning materials between the rented and owned warehouses.

Suggested Citation

  • Wutthisirisart, Phichet & Sir, Mustafa Y. & Noble, James S., 2015. "The two-warehouse material location selection problem," International Journal of Production Economics, Elsevier, vol. 170(PC), pages 780-789.
    • Handle: RePEc:eee:proeco:v:170:y:2015:i:pc:p:780-789
    DOI: 10.1016/j.ijpe.2015.07.008
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    References listed on IDEAS

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    2. Adarsh Kumar Singh & Nachiappan Subramanian & Kulwant Singh Pawar & Ruibin Bai, 2018. "Cold chain configuration design: location-allocation decision-making using coordination, value deterioration, and big data approximation," Annals of Operations Research, Springer, vol. 270(1), pages 433-457, November.

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