1. ISEN 601 Location Logistics
Dr. Gary M. Gaukler
Fall 2011

2. Heuristics Improvement heuristic:
The myopic algorithm identifies the n median locations.
Customers are assigned to their closest median.
Improvement heuristic:

3. Myopic Example

4. Myopic Example

5. Improvement Example

6. Improvement Example

7. Improvement Example

8. Discrete Location Models
“Warehouse Location Problem”
p potential warehouse locations

9. Warehouse Location Problem
Cost structure is more general:
Fixed costs
Variable shipping/transportation costs

10. Warehouse Location Problem
Decision variables:

11. Warehouse Location Problem
Mixed-integer programming formulation:

12. Warehouse Location Problem
Heuristic algorithms:
Add heuristic
Drop heuristic
Note that total cost generally decreases as facilities are added, and then increases after a point:

13. Warehouse Location Problem
Add heuristic:
Greedily add facilities to the solution until there is no facility to add that will reduce total cost
Drop heuristic:
Start with one facility at each candidate site. Remove facilities one by one until removal does not decrease total cost

14. Warehouse Location Problem
Example Add heuristic:

15. Warehouse Location Problem
Example Add heuristic:

16. Warehouse Location Problem
Example Add heuristic:

17. Warehouse Location Problem
Example Drop heuristic:

18. Warehouse Location Problem
Example Drop heuristic:

19. Transportation
Trends

20. Transportation
Some terms
FTL:
LTL:

21. Transportation
Transportation by type
Cost / ton-mile
Air:
FTL:
LTL:

22. Types of Transportation Paths
Direct Shipment:

23. Direct Shipment
Math formulation:

24. Direct Shipment
When to use?

25. Improvements to Direct Shipment
Option 1: Crossdocking

26. Improvements to Direct Shipment
Option 2: DC

27. Improvements to Direct Shipment
Option 3: Delivery rounds / TSP

28. Traveling Salesman Problem
Problem statement:

29. Traveling Salesman Problem
BIP formulation:

30. Traveling Salesman Problem
Subtours: