A Location-Inventory Problem for Customers with Time Constraints

Abstract

In this paper, a two-stage stochastic facility location problem integrated with inven- tory and recourse decisions is studied and solved. This problem is inspired by an industrial supply chain design problem of a large retail chain with slow-moving prod- ucts. Uncertainty is expressed by a discrete and finite set of scenarios. Recourse actions can be taken after the realization of random demands. Location, inventory, transportation, and recourse decisions are integrated into a mixed-integer program with an objective minimizing the expected total cost. A dual heuristic procedure is studied and embedded into the sample average approximation (SAA) method. The computation experiments demonstrate that our combined SAA with dual heuristic algorithm has a similar performance on solution quality and a much shorter compu- tational time.