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Embedding the production policy in location-allocation decisions

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Abstract

This paper investigates how the production policy, as well as other factors, affect the facility location-allocation decisions. We focus on a p-median location problem in which one single perishable product is to be produced and shipped to a set of users. The time-correlated demands of the clients are generated by autoregressive processes, and they are forecasted from historical data. Empirically, we show that: (i) embedding the production policy in the location-allocation decision problem may lead to a facilities-clients assignment which does not necessarily correspond to the minimum cost allocation, but produces better profits, (ii) taking into account the autocorrelation of the demand can significantly improve the performance of the supply chain, and (iii) the variability of the demand strongly affects the performance of the supply chain, so a careful choice of production strategy is especially recommended in this case.

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Conflict of interest

The authors declare that they have no conflict of interest.

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Authors and Affiliations

  1. Institute of Mathematics of the University of Seville (IMUS), Sevilla, Spain

    Emilio Carrizosa

  2. Booth School of Business, University of Chicago, 5807 S Woodlawn Ave, Chicago, IL, 60637, USA

    Alba V. Olivares-Nadal

  3. Department of Statistics and Operational Research, University of Cádiz, Cádiz, Spain

    Pepa Ramírez-Cobo

Authors
  1. Emilio Carrizosa
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  2. Alba V. Olivares-Nadal
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  3. Pepa Ramírez-Cobo
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Corresponding author

Correspondence to Alba V. Olivares-Nadal.

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This research is supported by Projects P11-FQM-7603 and FQM329 (Junta de Andalucía) and MTM2015-65915-R (Ministerio de Economía y Competitividad, Spain), all with ERD Funds. The authors are also supported by the project “Cost-sensitive classification. A Mathematical Optimization approach”, financed by BBVA Foundation.

Appendix

Appendix

See Fig. 5 and Table 5

Fig. 5
figure 5

Examples of high and low correlated autoregressive demands generated with errors following N(0, 1) and LN(0, 3)

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Table 5 Summary of the numerical setting
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Carrizosa, E., Olivares-Nadal, A.V. & Ramírez-Cobo, P. Embedding the production policy in location-allocation decisions. 4OR-Q J Oper Res 18, 357–380 (2020). https://doi.org/10.1007/s10288-019-00423-z

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  • DOI: https://doi.org/10.1007/s10288-019-00423-z

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