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Robust strategies for facility location under uncertainty


  • Gülpınar, Nalan
  • Pachamanova, Dessislava
  • Çanakoğlu, Ethem


This paper considers a stochastic facility location problem in which multiple capacitated facilities serve customers with a single product, and a stockout probabilistic requirement is stated as a chance constraint. Customer demand is assumed to be uncertain and to follow either a normal or an ambiguous distribution. We study robust approximations to the problem in order to incorporate information about the random demand distribution in the best possible, computationally tractable way. We also discuss how a decision maker’s risk preferences can be incorporated in the problem through robust optimization. Finally, we present numerical experiments that illustrate the performance of the different robust formulations. Robust optimization strategies for facility location appear to have better worst-case performance than nonrobust strategies. They also outperform nonrobust strategies in terms of realized average total cost when the actual demand distributions have higher expected values than the expected values used as input to the optimization models.

Suggested Citation

  • Gülpınar, Nalan & Pachamanova, Dessislava & Çanakoğlu, Ethem, 2013. "Robust strategies for facility location under uncertainty," European Journal of Operational Research, Elsevier, vol. 225(1), pages 21-35.
  • Handle: RePEc:eee:ejores:v:225:y:2013:i:1:p:21-35 DOI: 10.1016/j.ejor.2012.08.004

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    References listed on IDEAS

    1. Zuo-Jun Max Shen & Mark S. Daskin, 2005. "Trade-offs Between Customer Service and Cost in Integrated Supply Chain Design," Manufacturing & Service Operations Management, INFORMS, vol. 7(3), pages 188-207, September.
    2. E S Sheppard, 1974. "A conceptual framework for dynamic location - allocation analysis," Environment and Planning A, Pion Ltd, London, vol. 6(5), pages 547-564, May.
    3. Yao, Zhishuang & Lee, Loo Hay & Jaruphongsa, Wikrom & Tan, Vicky & Hui, Chen Fei, 2010. "Multi-source facility location-allocation and inventory problem," European Journal of Operational Research, Elsevier, vol. 207(2), pages 750-762, December.
    4. Karthik Natarajan & Dessislava Pachamanova & Melvyn Sim, 2008. "Incorporating Asymmetric Distributional Information in Robust Value-at-Risk Optimization," Management Science, INFORMS, vol. 54(3), pages 573-585, March.
    5. Gulpinar, Nalan & Rustem, Berc, 2007. "Robust optimal decisions with imprecise forecasts," Computational Statistics & Data Analysis, Elsevier, vol. 51(7), pages 3595-3611, April.
    6. Berman, Oded & Krass, Dmitry & Tajbakhsh, M. Mahdi, 2012. "A coordinated location-inventory model," European Journal of Operational Research, Elsevier, vol. 217(3), pages 500-508.
    7. Owen, Susan Hesse & Daskin, Mark S., 1998. "Strategic facility location: A review," European Journal of Operational Research, Elsevier, vol. 111(3), pages 423-447, December.
    8. Santoso, Tjendera & Ahmed, Shabbir & Goetschalckx, Marc & Shapiro, Alexander, 2005. "A stochastic programming approach for supply chain network design under uncertainty," European Journal of Operational Research, Elsevier, vol. 167(1), pages 96-115, November.
    9. Aharon, Ben-Tal & Boaz, Golany & Shimrit, Shtern, 2009. "Robust multi-echelon multi-period inventory control," European Journal of Operational Research, Elsevier, vol. 199(3), pages 922-935, December.
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    Cited by:

    1. Álvarez-Miranda, Eduardo & Fernández, Elena & Ljubić, Ivana, 2015. "The recoverable robust facility location problem," Transportation Research Part B: Methodological, Elsevier, vol. 79(C), pages 93-120.
    2. Keyvanshokooh, Esmaeil & Ryan, Sarah M. & Kabir, Elnaz, 2016. "Hybrid robust and stochastic optimization for closed-loop supply chain network design using accelerated Benders decomposition," European Journal of Operational Research, Elsevier, vol. 249(1), pages 76-92.
    3. repec:eee:ejores:v:262:y:2017:i:2:p:636-646 is not listed on IDEAS
    4. Gabrel, Virginie & Murat, Cécile & Thiele, Aurélie, 2014. "Recent advances in robust optimization: An overview," European Journal of Operational Research, Elsevier, vol. 235(3), pages 471-483.
    5. Xuejie Bai & Yankui Liu, 2016. "Robust optimization of supply chain network design in fuzzy decision system," Journal of Intelligent Manufacturing, Springer, vol. 27(6), pages 1131-1149, December.
    6. Paul Berglund & Changhyun Kwon, 2014. "Robust Facility Location Problem for Hazardous Waste Transportation," Networks and Spatial Economics, Springer, vol. 14(1), pages 91-116, March.
    7. Bieniek, Milena, 2015. "A note on the facility location problem with stochastic demands," Omega, Elsevier, vol. 55(C), pages 53-60.
    8. Espinoza Garcia, Juan Carlos & Alfandari, Laurent, 2015. "Robust location of new housing developments using a choice model," ESSEC Working Papers WP1521, ESSEC Research Center, ESSEC Business School.
    9. repec:spr:annopr:v:251:y:2017:i:1:d:10.1007_s10479-015-1926-1 is not listed on IDEAS
    10. Shahabi, Mehrdad & Unnikrishnan, Avinash, 2014. "Robust hub network design problem," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 356-373.
    11. Juan Carlos Espinoza Garcia & Laurent Alfandari, 2015. "Robust location of new housing developments using a choice model," Working Papers hal-01230621, HAL.
    12. Shishebori, Davood & Yousefi Babadi, Abolghasem, 2015. "Robust and reliable medical services network design under uncertain environment and system disruptions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 77(C), pages 268-288.


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