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Embedding the production policy in location-allocation decisions

Author

Listed:
  • Emilio Carrizosa

    (Institute of Mathematics of the University of Seville (IMUS))

  • Alba V. Olivares-Nadal

    (University of Chicago)

  • Pepa Ramírez-Cobo

    (University of Cádiz)

Abstract

This paper investigates how the production policy, as well as other factors, affect the facility location-allocation decisions. We focus on a p-median location problem in which one single perishable product is to be produced and shipped to a set of users. The time-correlated demands of the clients are generated by autoregressive processes, and they are forecasted from historical data. Empirically, we show that: (i) embedding the production policy in the location-allocation decision problem may lead to a facilities-clients assignment which does not necessarily correspond to the minimum cost allocation, but produces better profits, (ii) taking into account the autocorrelation of the demand can significantly improve the performance of the supply chain, and (iii) the variability of the demand strongly affects the performance of the supply chain, so a careful choice of production strategy is especially recommended in this case.

Suggested Citation

  • Emilio Carrizosa & Alba V. Olivares-Nadal & Pepa Ramírez-Cobo, 2020. "Embedding the production policy in location-allocation decisions," 4OR, Springer, vol. 18(3), pages 357-380, September.
    • Handle: RePEc:spr:aqjoor:v:18:y:2020:i:3:d:10.1007_s10288-019-00423-z
    DOI: 10.1007/s10288-019-00423-z
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