108 / 2024-04-20 11:52:59

A two-stage stochastic programming model for location-inventory problem with customer waiting time consideration

Stochastic facility location,retailer-based DC,waiting time limitation,dual heuristic procedure,Sample Average Approximation

In this paper, a two-stage stochastic facility location problem integrated with inventory and transportation decisions is studied. This problem is inspired by a practical supply chain design problem arising from a large retail chain with slow-moving products. When the customers arrive, they express a time limit they would allow the demand to be satisfied. If the local store does not have this product, the manager could resort to distribution center, neighbor store, or third party company, with different transportation times and acquirement costs. In this problem, uncertainty is expressed by a discrete and finite set of scenarios. Recourse actions can be taken after the realization of random demands. The objective is to minimize the expected total cost of location, inventory and transportation. To solve the two-stage stochastic integer program, we improve the dual heuristic procedure proposed by Louveaux and Peeters (1992) and integrate it with the Sample Average Approximation (SAA) method. The computation experiments show that the proposed SAA heuristic has a much shorter computational time with comparable performance on solution quality than the standard SAA.