| The goals of this research are to: (1) formulate and analyze a location model for multi-product, multi-echelon distribution systems where there are significant economies-of-scale in the transportation movements; (2) integrate the location model with a multi-product, multi-echelon inventory allocation model for finished goods; and (3) demonstrate the effectiveness of the integrated model by means of a substantial case study, involving the design of a realistic distribution network.; The location model is a strategic model in which the key design decisions considered are: the number and locations of distribution centers (CC's), and the routing of shipments (through a consolidation center or by direct shipment) between production plants and distribution centers. The presence of transportation economies-of-scale creates opportunities for reducing transportation costs by consolidating shipments, but complicates the mathematical analysis of the location problem.; The inventory allocation model is tactical in nature, where the key decisions are where to stock inventory and how much to stock of the various products to be held at each potential stocking location. The design decisions are made with concern both for total inventory investment and for service levels (measured by the average stockout probability at each echelon).; The location and inventory allocation models are linked because it is important to consider (at least approximately) the inventory implications of location decisions at the strategic level, and the tactical decisions on inventory allocation must be made within the overall system structure determined by the strategic analysis. The practical implications of this linkage are illustrated through the case study in distribution network design for an automotive manufacturer. |
