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A two‐echelon inventory‐location problem with service considerations

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  • Ho‐Yin Mak
  • Zuo‐Jun Max Shen

Abstract

We study the problem of designing a two‐echelon spare parts inventory system consisting of a central plant and a number of service centers each serving a set of customers with stochastic demand. Processing and storage capacities at both levels of facilities are limited. The manufacturing process is modeled as a queuing system at the plant. The goal is to optimize the base‐stock levels at both echelons, the location of service centers, and the allocation of customers to centers simultaneously, subject to service constraints. A mixed integer nonlinear programming model (MINLP) is formulated to minimize the total expected cost of the system. The problem is NP‐hard and a Lagrangian heuristic is proposed. We present computational results and discuss the trade‐off between cost and service. © 2009 Wiley Periodicals, Inc. Naval Research Logistics 2009

Suggested Citation

  • 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.
    • Handle: RePEc:wly:navres:v:56:y:2009:i:8:p:730-744
    DOI: 10.1002/nav.20376
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    Cited by:

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    2. Hossein Abouee-Mehrizi & Opher Baron & Oded Berman, 2014. "Exact Analysis of Capacitated Two-Echelon Inventory Systems with Priorities," Manufacturing & Service Operations Management, INFORMS, vol. 16(4), pages 561-577, October.
    3. 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.
    4. Zhong, Yuanguang & Shu, Jia & Xie, Wei & Zhou, Yong-Wu, 2018. "Optimal trade credit and replenishment policies for supply chain network design," Omega, Elsevier, vol. 81(C), pages 26-37.
    5. Qiao‐Chu He & Tiantian Nie & Yun Yang & Zuo‐Jun Shen, 2021. "Beyond Repositioning: Crowd‐Sourcing and Geo‐Fencing for Shared‐Mobility Systems," Production and Operations Management, Production and Operations Management Society, vol. 30(10), pages 3448-3466, October.
    6. Ali Diabat & Jean-Philippe Richard, 2015. "An integrated supply chain problem: a nested lagrangian relaxation approach," Annals of Operations Research, Springer, vol. 229(1), pages 303-323, June.
    7. Onur Kaya & Dogus Ozkok, 2020. "A Blood Bank Network Design Problem with Integrated Facility Location, Inventory and Routing Decisions," Networks and Spatial Economics, Springer, vol. 20(3), pages 757-783, September.
    8. 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).

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