Stochastic facility location with general long-run costs and convex short-run costs

Abstract

This paper addresses the problem of minimizing the expected cost of locating a number of single product facilities and allocating uncertain customer demand to these facilities. The total costs consist of two components: firstly linear transportation cost of satisfying customer demand and secondly the costs of investing in a facility as well as maintaining and operating it. These facility costs are general and non-linear in shape and could express both changing economies of scale and diseconomies of scale. We formulate the problem as a two-stage stochastic programming model where both demand and short-run costs may be uncertain at the investment time. We use a solution method based on Lagrangean relaxation, and show computational results for a slaughterhouse location case from the Norwegian meat industry.

Facility Location Under Uncertainty

“…To the best of our knowledge, the first type of approach was never applied to stochastic facility location. However, there are several papers proposing dual decomposition based algorithms for problems that include location decisions, namely those by Schütz et al (2008Schütz et al ( , 2009. The latter work combines dual decomposition with SAA.…”

Building models based on environment with hybrid uncertainty

“…Laporte et al [31] formulated a class of capacitated facility location problems with random demands by using stochastic integer linear programming, and proposed a branch and cut solution approach. Schutz et al [60] considered a stochastic facility location problem with general long-run costs and convex short-run costs, and solved the problem through a Lagrange relaxation based method. For more studies on stochastic facility location problems, one may refer to Berman and Drezner [3] and Zeng and Ward [102].…”

An integrated quantitative and qualitative FMCDM model for location choices

“…Via the proposed assessment model in a way that has not been done before, the decision-maker or leader of the MNEs can select the appropriate facility site among the countries. Schutz et al (2008) address the problem of minimizing the expected cost of locating a number of single product facilities and allocating uncertain customer demand to these facilities. The total costs consist of two components: first, linear transportation cost and second, the costs of investing in a facility as well as maintaining and operating it.…”