Invited ReviewFacility location and supply chain management – A review
Introduction
Facility location is and has been a well established research area within Operations Research (OR). Numerous papers and books are witnesses of this fact (see, e.g. [29] and references therein). The American Mathematical Society (AMS) even created specific codes for location problems (90B80 for discrete location and assignment, and 90B85 for continuous location). Nevertheless, the question of the applicability of location models has always been under discussion. In contrast, the practical usefulness of logistics was never an issue. One of the areas in logistics which has attracted much attention is Supply Chain Management (SCM) (see, e.g. [114] and references therein). In fact, the development of SCM started independently of OR and only step by step did OR enter into SCM (see, e.g. [18]). As a consequence, facility location models have been gradually proposed within the supply chain context (including reverse logistics), thus opening an extremely interesting and fruitful application domain. There are naturally several questions which immediately arise during such a development, namely: (i) What properties does a facility location model have to fulfill to be acceptable within the supply chain context? (ii) Are there existing facility location models which already fit into the supply chain context? (iii) Does SCM need facility location models at all?
As the number of papers has increased tremendously in the last few years and even the Association of European Operational Research Societies (EURO) has recently devoted a Winter institute to this topic [35], we felt that the time was ripe to have a review paper looking exactly at the role of facility location models within SCM. Before starting the review we briefly define our two main objects of investigation, namely facility location and SCM.
A general facility location problem involves a set of spatially distributed customers and a set of facilities to serve customer demands (see, e.g. [29], [90]). Moreover, distances, times or costs between customers and facilities are measured by a given metric (see [96]). Possible questions to be answered are: (i) Which facilities should be used (opened)? (ii) Which customers should be serviced from which facility (or facilities) so as to minimize the total costs? In addition to this generic setting, a number of constraints arise from the specific application domain. For recent reviews on facility location we refer to Klose and Drexl [58] and ReVelle et al. [97].
SCM is the process of planning, implementing and controlling the operations of the supply chain in an efficient way. SCM spans all movements and storage of raw materials, work-in-process inventory, and finished goods from the point-of-origin to the point-of-consumption (see [114] and the Council of Supply Chain Management Professionals [21]). Part of the planning processes in SCM aims at finding the best possible supply chain configuration. In addition to the generic facility location setup, also other areas such as procurement, production, inventory, distribution, and routing have to be considered (see [20]). Historically, researchers have focused relatively early on the design of distribution systems (see [58] and references therein) but without considering the supply chain as a whole.
Since it is not possible to survey all the literature associated both with facility location and SCM, we will concentrate our review on articles published in the last decade that go beyond location–allocation decisions (and thus, we will exclude simple single facility location and pure resource allocation models). Moreover, we will only consider discrete models. Although continuous facility location models may as well play a role in our context, they often have a macroeconomics flavour which would distract us from the typical SCM perspective. With this scope in mind, we identified approximately 120 articles that were published in the last decade, including a few papers that will appear in 2008. Further screening yielded 98 articles from 19 journals that address relevant aspects to our analysis. Of these, 56 were published in 2004 or later, which clearly shows the recent progress this research area is experiencing. For example, compared to the year 2002, the number of publications doubled in 2007 (22 against 11). In particular, the European Journal of Operational Research has been a major forum for the presentation of new developments and research results (in total 44 articles were identified). Other journals such as Computers & Operations Research (18 papers), Interfaces (six papers), Transportation Research (seven papers), and Omega and International Journal of Production Economics (each with six articles) have significantly contributed to this emerging research field.
The remainder of the paper is organized as follows: Section 2 focuses on the relation between facility location and SCM. Section 3 is devoted to reviewing facility location papers in strategic SCM. Optimization methods for solving facility location problems in a supply chain context are reviewed in Section 4 as well as practical applications of location models in SCM. The paper ends with some conclusions and possible directions for future research.
Section snippets
Facility location and SCM
In a discrete facility location problem, the selection of the sites where new facilities are to be established is restricted to a finite set of available candidate locations. The simplest setting of such a problem is the one in which p facilities are to be selected to minimize the total (weighted) distances or costs for supplying customer demands. This is the so-called p-median problem which has attracted much attention in the literature (see, e.g. [24], [29], [96]). This setting assumes that
Strategic supply chain planning
In this section we give a synthesis of the existing literature in terms of essential aspects and decisions (strategic as well as tactical/operational) that should be included in facility location models to support the decision-making process in SCM.
Supply chain optimization and applications
We complete our review of the literature on facility location models in an SCM environment by presenting additional information regarding the papers listed in Table 1. We analyze the type of supply chain performance measures used, the methodology followed to solve the problems, and applications of facility location models to strategic supply chain planning.
Fig. 2 depicts the type of objective function that measures supply chain performance. The majority of the papers feature a cost minimization
Conclusions and directions for further research
In this paper we reviewed the most recent literature on facility location analysis within the context of SCM and discussed the general relation between facility location models and strategic supply chain planning. Moreover, we identified the characteristics that a facility location model should have to adequately address SCM planning needs. We dedicated separate sections to the relation between facility location and SCM, facility location models within SCM, and solution methods as well as
References (139)
- et al.
A location-routing problem for the conversion to the “click-and-mortar” retailing: The static case
European Journal of Operational Research
(2008) - et al.
Distribution network design: New problems and related models
European Journal of Operational Research
(2005) Designing a distribution network in a supply chain system: Formulation and efficient solution procedure
European Journal of Operational Research
(2006)- et al.
Distribution centre location modelling for differential sales tax structure
European Journal of Operational Research
(2005) - et al.
A two-level network for recycling sand: A case study
European Journal of Operational Research
(1998) - et al.
Supply chain competitiveness: Measuring the impact of location factors, uncertainty and manufacturing practices
Technovation
(2005) - et al.
An algorithm for the capacitated, multi-commodity multi-period facility location problem
Computers & Operations Research
(2001) - et al.
Supply chain management in forestry – Case studies at södra cell AB
European Journal of Operational Research
(2005) Global plant capacity and product allocation with pricing decisions
European Journal of Operational Research
(2005)- et al.
A multiple-depot, multiple-vehicle, location-routing problem with stochastically processed demands
Computers & Operations Research
(2001)
A continuous model for production–distribution system design
European Journal of Operational Research
Efficient primal–dual heuristic for a dynamic location problem
Computers & Operations Research
A bi-objective reverse logistics network analysis for post-sale service
Computers & Operations Research
Integrated production/distribution planning in supply chains: An invited review
European Journal of Operational Research
Outbound supply chain network design with mode selection, lead times and capacitated vehicle distribution centers
European Journal of Operational Research
Combination of MCDM and covering techniques in a hierarchical model for facility location: A case study
European Journal of Operational Research
Quantitative models for reverse logistics: A review
European Journal of Operational Research
Modeling and design of global logistics systems: A review of integrated strategic and tactical models and design algorithms
European Journal of Operational Research
A stochastic model for risk management in global supply chain networks
European Journal of Operational Research
Multiobjective supply chain design under uncertainty
Chemical Engineering Science
Supply chain modelling of forest fuel
European Journal of Operational Research
A multiperiod two-echelon multi-commodity capacitated plant location problem
European Journal of Operational Research
Dynamic supply chain design with inventory
Computers & Operations Research
Environmentally conscious long-range planning and design of supply chain networks
Journal of Cleaner Production
Design of supply-chain logistics system considering service level
Computers & Industrial Engineering
A combined model of network design and production/distribution planning for a supply network
Computers & Industrial Engineering
Planning and coordination of production and distribution facilities for multiple commodities
European Journal of Operational Research
A simulated annealing methodology to distribution network design and management
European Journal of Operational Research
The design of reverse distribution networks: Models and solution procedures
European Journal of Operational Research
A review of multi-factor capacity expansion models for manufacturing plants: Searching for a holistic decision aid
International Journal of Production Economics
Meta-heuristic approaches with memory and evolution for a multi-product production/distribution system design problem
European Journal of Operational Research
A scatter search-based heuristic to locate capacitated transshipment points
Computers & Operations Research
Facility location models for distribution system design
European Journal of Operational Research
A genetic algorithm-based heuristic for the dynamic integrated forward/reverse logistics network for 3PLs
Computers & Operations Research
A heuristic approach to logistics network design for end-of-lease computer products recovery
Transportation Research Part E: Logistics and Transportation Review
Reverse logistics network design with stochastic lead times
Computers & Operations Research
A generic stochastic model for supply-and-return network design
Computers & Operations Research
A stochastic approach to a case study for product recovery network design
European Journal of Operational Research
Screening location strategies to reduce exchange rate risk
European Journal of Operational Research
A facility location model for logistics systems including reverse flows: The case of remanufacturing activities
Computers & Operations Research
The return plant location problem: Modelling and resolution
European Journal of Operational Research
Lagrangian-relaxation-based solution procedures for a multiproduct capacitated facility location problem with choice of facility type
European Journal of Operational Research
Global supply chain design: A literature review and critique
Transportation Research Part E: Logistics and Transportation Review
The dynamic relocation and phase-out of a hybrid, two-echelon plant/warehousing facility: A multiple objective approach
European Journal of Operational Research
Redesigning a warehouse network
European Journal of Operational Research
Consolidating a warehouse network: A physical programming approach
International Journal of Production Economics
Capacitated facility location/network design problems
European Journal of Operational Research
Dynamic multi-commodity capacitated facility location: A mathematical modeling framework for strategic supply chain planning
Computers & Operations Research
The relocation of a hybrid manufacturing/distribution facility from supply chain perspectives: A case study
Omega
Supply chain modeling: Past, present and future
Computers & Industrial Engineering
Cited by (1494)
Flexibility in manufacturing system design: A review of recent approaches from Operations Research
2024, European Journal of Operational ResearchAn integrated bi-objective optimization model accounting for the social acceptance of renewable fuel production networks
2024, European Journal of Operational ResearchAn optimization approach to improve equitable access to local parks
2024, Socio-Economic Planning SciencesAn uncertain sustainable supply chain network design for regulating greenhouse gas emission and supply chain cost
2024, Cleaner Logistics and Supply ChainMulti-period facility location and capacity expansion with modular capacities and convex short-term costs
2024, Computers and Operations ResearchLocation-pricing problem in a two-echelon supply chain: A behavioral game-theoretic approach
2024, Computers and Operations Research