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Multi-item distribution network design problems under volume discount on transportation cost

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  • Yu-Chung Tsao
  • Qinhong Zhang
  • Tsung-Hui Chen

Abstract

This study considers the distribution network design problems of multi-echelon, multi-item supply chains under volume (weight) discounts on transportation costs. Minimising the total network cost requires determining the following: (1) the service area of distribution centres (DCs); (2) the assignment of retail stores to DCs; and (3) the inventory volume at DCs. This study compares various replenishment policies and discusses the effects of such policies on distribution network design. In general, the results show that single-cluster replenishment is superior to joint cluster replenishment. However, joint cluster replenishment may be superior to single-cluster replenishment under volume (weight) discounts on transportation costs. The results additionally show that single-item replenishment is inferior to multi-item replenishment under volume (weight) discounts on transportation costs. All the problems are formulated as piecewise non-linear programming models with multiple variables. Algorithms are proposed for solving these piecewise non-linear programming problems. Several numerical studies demonstrate the solution procedures and the effects of changing parameters on decision-making.

Suggested Citation

  • Yu-Chung Tsao & Qinhong Zhang & Tsung-Hui Chen, 2016. "Multi-item distribution network design problems under volume discount on transportation cost," International Journal of Production Research, Taylor & Francis Journals, vol. 54(2), pages 426-443, January.
    • Handle: RePEc:taf:tprsxx:v:54:y:2016:i:2:p:426-443
    DOI: 10.1080/00207543.2015.1018453
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    Cited by:

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    2. Ke, Ginger Y. & Bookbinder, James H., 2018. "Coordinating the discount policies for retailer, wholesaler, and less-than-truckload carrier under price-sensitive demand: A tri-level optimization approach," International Journal of Production Economics, Elsevier, vol. 196(C), pages 82-100.
    3. Ansari, Sina & Başdere, Mehmet & Li, Xiaopeng & Ouyang, Yanfeng & Smilowitz, Karen, 2018. "Advancements in continuous approximation models for logistics and transportation systems: 1996–2016," Transportation Research Part B: Methodological, Elsevier, vol. 107(C), pages 229-252.

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