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A profit-maximization location-capacity model for designing a service system with risk of service interruptions

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  • Hoseinpour, Pooya
  • Ahmadi-Javid, Amir

Abstract

This paper considers the design of an immobile service system in which each facility’s service process is subject to the risk of interruptions. The location-capacity decisions and allocations are simultaneously made to maximize the difference between the service provider’s profit and the sum of customers’ transportation and waiting costs. An efficient Lagrangian-based solution algorithm is developed, which solves large-sized instances with up to 50 service facilities and 500 customers in a few seconds. Several sensitivity analyses and managerial insights are presented. The model is also applied to a case study on a logistics network design problem in the zinc mining industry.

Suggested Citation

  • Hoseinpour, Pooya & Ahmadi-Javid, Amir, 2016. "A profit-maximization location-capacity model for designing a service system with risk of service interruptions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 96(C), pages 113-134.
    • Handle: RePEc:eee:transe:v:96:y:2016:i:c:p:113-134
    DOI: 10.1016/j.tre.2016.08.004
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    Cited by:

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    2. Zamani, Shokufeh & Arkat, Jamal & Niaki, Seyed Taghi Akhavan, 2022. "Service interruption and customer withdrawal in the congested facility location problem," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 165(C).
    3. Ahmadi-Javid, Amir & Hoseinpour, Pooya, 2019. "Service system design for managing interruption risks: A backup-service risk-mitigation strategy," European Journal of Operational Research, Elsevier, vol. 274(2), pages 417-431.

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