Integrated Logistics Network Design and
Inventory
Management in Service Parts Logistics
Mehmet Candas
Operations Research and Industrial Engineering
Graduate Program
Department of Mechanical Engineering
The
We
study the integrated logistics network design and inventory stocking problem as
characterized by the interdependency of the design and stocking decisions in
service parts logistics. These two sets of decisions have been usually
considered sequentially in practice, and the associated problems have been
tackled separately in the research literature. The overall problem is typically
further complicated due to time-based service constraints that provide lower
limits for the percentages of demand satisfied within specified time windows. We introduce an optimization model that
explicitly captures the interdependency between network design (locating
facilities, and allocating customers to facilities) and inventory stocking
decisions (stock levels and their corresponding stochastic fill rates). We have
computational results from our extensive experiments showing that the
integrated approach can provide significant cost savings over the disintegrated
approaches. Further, we analyze a
special case of the general problem, where each customer requires a certain
time-based service level. We show that this case has polynomially
solvable subcases, but in general it is still a
challenging problem, for which we have a Lagrangian-relaxation
based approach that provides extremely tight lower and upper bounds.