The efficiency and the effectiveness of supply chain networks primarily rely on facility location decisions. However, these decisions are closely related to the other supply chain management decisions, i.e., inventory management and transportation decisions. Therefore, the main goal of this thesis is to find optimal or near optimal facility location decisions by taking into account routing and inventory costs. Three integrated supply chain problems are studied: the Location Routing Problem, the Location Routing Inventory Problem, and the Location Model with Risk-Pooling. For the Location Routing Problem, we present a two-phase heuristic, the Two-Echelon Location Model Heuristic, in which first location allocation decisions and then routing decisions are made. The proposed heuristic is novel since both phases involve optimization problems which are solved using convergent solution algorithms; in addition, the first phase approximately captures the second phase decisions by considering route lengths.
In the second part of the thesis, heuristics for solving integrated location-inventory problems are presented. First, a two-phase heuristic for solving the Location Routing Inventory Problem is presented, the objective of which is to minimize the sum of location, routing, and inventory costs. The first phase of the proposed heuristic solves for the location and clustering decisions by transforming the problem into a Two-Echelon Location Problem with Risk-Pooling (TELP-RP), which approximately captures the effects of the routing decisions. In the second phase of the heuristic, multiple Traveling Salesman Problems are solved to transform the TELP-RP solution into a solution for the original problem. To solve the TELP-RP, an Updated Linear Approximation (ULA) heuristic was developed, which approximates the nonlinear inventory costs. The ULA heuristic is also applied to solve the Location-Model with Risk-Pooling, and its performance is compared with other published solution approaches.
Finally, the benefits of integrating the supply chain management decisions are investigated in detail by focusing on two different integrated supply chain problems: the LRP and the LRIP. Three different levels of integration are considered: (1) fully integrated approaches that solve for all supply chain management decisions simultaneously; (2) partially integrated approaches that integrate only some of the supply chain management decisions in the same model; and (3) sequential approaches where the supply chain management decisions are solved sequentially. For both the LRP and the LRIP, the benefits of integrating supply chain decisions are measured for various transportation and inventory cost factors.
