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A three-level supply chain network design model with risk-pooling and lead times

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  • Park, Sukun
  • Lee, Tae-Eog
  • Sung, Chang Sup

Abstract

This paper considers a single-sourcing network design problem for a three-level supply chain consisting of suppliers, distribution centers (DC's) and retailers, where risk-pooling strategy and DC-to-supplier dependent lead times are considered. The objective is to determine the number and locations of suppliers and DC's, the assignment of each location-fixed DC to a supplier and that of each retailer to a DC, which minimizes the system-wide location, transportation, and inventory costs. The problem is formulated as a nonlinear integer programming model, for which a two-phase heuristic solution algorithm is derived based on the Lagrangian relaxation approach. Numerical experiments show that the proposed heuristic is effective and also efficient.

Suggested Citation

  • Park, Sukun & Lee, Tae-Eog & Sung, Chang Sup, 2010. "A three-level supply chain network design model with risk-pooling and lead times," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(5), pages 563-581, September.
    • Handle: RePEc:eee:transe:v:46:y:2010:i:5:p:563-581
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