Applying mixed integer programming to the design of a distribution logistic network

Facility location (FL) and production/distribution planning are two of the most significant operational and competitive decisions for modern companies who operate worldwide. The objective of this study was the development and application of a set of mathematical programming models for both the design and management of a multi-stage distribution system to meet the continuous and tremendous pressure on companies to be flexible, competitive, and reduce production and logistic costs. The generic location allocation problem (LAP) belongs to the class of NP-hard complexity problems. It is based on the placement of one or more facilities (the location problem) in optimum locations and on the concurrent assignment of customers to them (the allocation problem) in the best possible way. This requires the maximization of facility utilization, minimization of global costs, maximization of profit and service levels, and finally, it must respect a large set of physical and management constraints operating in the supply chain. Significance: The proposed models were efficient in rationalizing the global logistics networks with which large industrial companies operate. The application of linear integer models and what-if analysis based on simulation obtained important results: significant changes in the number of distribution centers (DCs), distribution times and transportation costs. Further research as well as wider application are required.