Design of a logistics network via an optimization model considering out-of-stocks

A multiperiod mixed integer programming is presented to minimize the total costs of the logistics network of a firm that sells veterinary products in Colombia. The products are imported through two ports and they are distributed from four distribution centers to the final customers in the country. The model considers the costs of out-of-stocks that occur when the goods are below a minimum safety stock level. Other costs such as costs to open (or to re-open) a facility during the time horizon are also considered. Eight scenarios plus the business-as-is scenario are solved: four scenarios take into account increasing cost of out-of-stocks and four scenarios consider a decreasing cost trend. The results show that there is an inverse relationship between the cost of inventory and the cost of out-of-stocks. This fact carries strategic modifications in the logistics network of the firm under study