A logit-based model for facility placement planning in supply chain management

Abstract

The facility placement in supply chain management entails suppliers and consumers along with the terminals in between for distributing commodities. This study seeks to find the best terminal placement by taking into consideration the costs for both transportation and terminal construction. We call this a supplier-terminal-consumer (STC) problem and show that the STC is an NP-hard quadratic assignment problem. The NP-hard problems in real-size are proven to be intractable; hence, we develop a two-fold heuristic method for solving the STC problems. First, we identify the commodity flow by using a logit-based mathematical programming (Logit-MP) methodology based on the demand for the commodity ..