This paper addresses the problem of minimizing the expected cost of locating a number of single product facilities and allocating uncertain customer demand to these facilities. The total costs consist of two components: firstly linear transportation cost and secondly the costs of investing in a facility as well as maintaining and operating it. These facility costs are general and non-linear in shape and could express both changing economies of scale and diseconomies of scale. We formulate the problem as a two-stage stochastic programming model where both demand and short-run costs may be uncertain at the investment time. We use a solution method based on Lagrangean relaxation, and show computational results for a slaughterhouse location case from the Norwegian meat industry.
Additional Metadata
THEME Logistics (theme 3)
Publisher Pergamon
Journal Computers & Operations Research
Project Combinatorial Algorithms in Bio-informatics
Schütz, P, Stougie, L, & Tomasgard, A. (2008). Stochastic facility location with general long-run costs and convex short-run costs. Computers & Operations Research, 35(9), 2988–3000.