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Facility Location with Stochastic Demand and Constraints on Waiting Time

Author

Listed:
  • Opher Baron

    () (Joseph L. Rotman School of Management, University of Toronto, Toronto, Ontario, Canada M5S 3E6)

  • Oded Berman

    () (Joseph L. Rotman School of Management, University of Toronto, Toronto, Ontario, Canada M5S 3E6)

  • Dmitry Krass

    () (Joseph L. Rotman School of Management, University of Toronto, Toronto, Ontario, Canada M5S 3E6)

Abstract

We analyze the problem of optimal location of a set of facilities in the presence of stochastic demand and congestion. Customers travel to the closest facility to obtain service; the problem is to determine the number, locations, and capacity of the facilities. Under rather general assumptions (spatially distributed continuous demand, general arrival and service processes, and nonlinear location and capacity costs) we show that the problem can be decomposed, and construct an efficient optimization algorithm. The analysis yields several insights, including the importance of equitable facility configurations (EFCs), the behavior of optimal and near-optimal capacities, and robust class of solutions that can be constructed for this problem.

Suggested Citation

  • Opher Baron & Oded Berman & Dmitry Krass, 2008. "Facility Location with Stochastic Demand and Constraints on Waiting Time," Manufacturing & Service Operations Management, INFORMS, vol. 10(3), pages 484-505, August.
  • Handle: RePEc:inm:ormsom:v:10:y:2008:i:3:p:484-505
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    File URL: http://dx.doi.org/10.1287/msom.1070.0182
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    References listed on IDEAS

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    1. Vladimir Marianov & Daniel Serra, 1994. "Probabilistic maximal covering location models for congested systems," Economics Working Papers 70, Department of Economics and Business, Universitat Pompeu Fabra.
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    1. repec:spr:annopr:v:253:y:2017:i:1:d:10.1007_s10479-016-2353-7 is not listed on IDEAS
    2. repec:iim:iimawp:13011 is not listed on IDEAS
    3. Jayaswal, Sachin, 2014. "Emergency Medical Service System Design under Service Level Constraints for Heterogeneous Patients," IIMA Working Papers WP2014-11-04, Indian Institute of Management Ahmedabad, Research and Publication Department.
    4. repec:spr:annopr:v:246:y:2016:i:1:d:10.1007_s10479-015-1886-5 is not listed on IDEAS
    5. Edward Hult & Houyuan Jiang & Daniel Ralph, 2014. "Exact computational approaches to a stochastic uncapacitated single allocation p-hub center problem," Computational Optimization and Applications, Springer, vol. 59(1), pages 185-200, October.
    6. repec:spr:annopr:v:246:y:2016:i:1:d:10.1007_s10479-014-1617-3 is not listed on IDEAS
    7. 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.

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