A Binary Quadratic Optimization Model for Three Level Supply Chain Design

AbstractWe present a binary quadratic optimization model for multi-capacitated three-level supply chain design including suppliers, distribution centers (DCs), and customer zones. Our model considers DC land, building and variable costs, and takes into account economies of scale. It is the inclusion of variable costs that makes the model quadratic. We present a series of model simplifications that allow for the solution of the model. We demonstrate the effectiveness of our model and model simplifications through the design of a real-world supply chain with 47 suppliers at fixed locations, 83 potential DCs and 2,976 fixed customer zones