A heterogeneous reliable location model with risk pooling under supply disruptions

Abstract

This paper investigates a facility location model that considers the disruptions of facilities and the cost savings from the inventory risk-pooling effect and economies of scale. Facilities may have heterogenous disruption probabilities. When a facility fails, its customers may be reassigned to other surviving ones to hedge against lost-sales costs. We first develop both an exact and an approximate expression for the nonlinear inventory cost, and then formulate the problem as a nonlinear integer programming model. The objective is to minimize the expected total cost across all possible facility failure scenarios. To solve this problem, we design two methods, an exact approach using special ordered sets of type two (SOS2) and a heuristic based on Lagrangian relaxation. We test the model and algorithms on data sets with up to 150 nodes. Computational results show that the proposed algorithms can solve the problem efficiently in reasonable time. Managerial insights on the optimal facility deployment, customer assignments and inventory control strategies are also drawn.

Location Data Analytics in the Business Value Chain: A Systematic Literature Review

“…Other data sources correspond to dedicated location information providers such as the Environmental Systems Research Institute (ESRI 1 ), Openstreetmap 2 , and Google [11], [12], [17], [24], [44], [45], [47]- [50], [52], [54], [55], [60], [64], [76], [78], [80]- [85], [87]- [93], [95]- [97], [107], [108], [111]- [114], [117], [118], [121], [126], [127], [129], [132], [137], [138], [143], [147], [149]- [154], [156], [157], [159], [168], [169], [171], [175]- [184], [192], [197], [199]...…”

A reliable facility location design model with site-dependent disruption in the imperfect information context

“…The two models can deal with different scale problems and obtain optimal or near-optimal facility location design. Later, a number of studies extend the general facility location problem to various aspects including sensor deployment [ 8 ], biofuel supply chain [ 9 , 10 ] and joint location-inventory problem [ 11 ]. The studies on the facility location problem with either independent identical or site-dependent disruption probability have the same assumption that customers have perfect information of facility states so that they can visit the nearest operating facility directly.…”

“…Such site-dependent disruptions significantly raise the difficulty of describing and modeling relevant facility location design problems. Thus, only limited works have been done in the facility location literature to address site-dependent disruptions [ 7 – 11 ]. All these studies investigate problems under perfect information; i.e., customers know the exact real-time information of facility states and always visit the nearest functional facility directly in any disruption scenario.…”

The competitive facility location problem under disruption risks

“…Cui et al (2010) and Aboolian et al (2012) generalize the work of Snyder and Daskin (2005) by allowing sitedependent disruption probabilities. Zhang et al (2016) allow site-dependent probabilities and also incorporate inventory costs. Shen et al (2011) formulate the RFLP as a nonlinear integer optimization problem and propose a near-optimal heuristic for the special case with identical probabilities.…”