Determination of Network Configuration Considering Inventory Cost in a Supply Chain

AbstractIn this paper we show the importance of applying mathematical optimization when designing the distribution network in a supply chain, specifically in making decisions related location of facilities and inventory management, which are associated with different levels of planning but are closely related.The addressed problem is an extension of the classic capacitated facility location problem. The distinguishing features are: the inventory management, the presence of multiple plants, and the single source constraints in both echelons. A key issue is that demand at each distribution center is a function of the demands at the retailers assigned, which is a random variable whose value is not known at the time of designing the network. We focus on the mathematical modeling of the problem and the evaluation of the performance of the developed models, so, it can be observed the troubles that arise when modeling supply chains that consider different types of decisions