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Joint location-inventory problem with differentiated service levels using critical level policy |
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| Institution: | 1. Department of Industrial Engineering, Tsinghua University, Beijing, 100084, China;2. Division of Engineering, New York University Abu Dhabi, Saadiyat Island, 129188, Abu Dhabi, United Arab Emirates;3. Department of Civil and Urban Engineering, Tandon School of Engineering, New York University, Brooklyn, NY 11201, United States of America |
| Abstract: | This paper analyzes the design of a distribution network for fast-moving items able to provide differentiated service levels in terms of product availability for two demand classes (high and low priority) using a critical level policy. The model is formulated as a MINLP with chance constraints for which we propose a heuristic to solve it. Although the heuristic does not guarantee an optimal solution, our computational experiments have shown that it provides good-quality solutions that are on average 0.8% and at worst 2.7% from the optimal solution. |
| Keywords: | Location-inventory model Two demand classes Critical level rationing Fast-moving items Mixed integer non linear programming |
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