Vehicle routing considerations in distribution system design (Q1107414)

In Distribution System Design, one minimizes total costs related to the number, locations and sizes of warehouses, and the assignment of warehouses to customers. The resulting system, while optimal in a strategic sense, may not be the best choice if operational aspects such as vehicle routing are also considered. We formulate a multicommodity, capacitated distribution planning model as a nonlinear, mixed integer program. Distribution from factories to customers is two-staged via depots (warehouses) whose number and location must be chosen. Vehicle routes from depots to customers are established by considering the ``fleet size and mix'' problem, which also incorporates strategic decisions on fleet makeup and vehicle numbers of each type. This problem is solved as a generalized assignment problem, within an algorithm for the overall distribution/routing problem that is based on Benders decomposition. We furnish two versions of our algorithm denoted Technique I and II. The latter is an enhancement of the former and is employed at the user's discretion. Computer solution of test problems is discussed.