Multiple criteria optimization of contemporary logistics distribution network problems
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Multiple criteria optimization of contemporary logistics distribution network problems William Hoa,*, Carman K.M. Leeb and George To Sum Hoc a Operations and Information Management Group, Aston Business School, Aston University, Birmingham B4 7ET, UK. b Division of Systems and Engineering Management, School of Mechanical and Aerospace Engineering, Nanyang Technological University, 50 Nanyang Avenue, Singapore 639798. c Department of Industrial and Systems Engineering, The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong.
*Corresponding author.
Abstract
In the contemporary customer-driven supply chain, maximization of customer service plays an equally important role as minimization of costs for a company to retain and increase its competitiveness. This article develops a multiple-criteria optimization approach, combining the analytic hierarchy process (AHP) and an integer linear programming (ILP) model, to aid the design of an optimal logistics distribution network. The proposed approach outperforms traditional cost-based optimization techniques because it considers both quantitative and qualitative factors and also aims at maximizing the benefits of deliverer and customers. In the approach, the AHP is used to determine the relative importance weightings or priorities of alternative warehouses with respect to some critical customer-oriented criteria. The results of AHP prioritization are utilized as the input of the ILP model, the objective of which is to select the best warehouses at the lowest possible cost. In this article, two commercial packages are used: including Expert Choice and LINDO. OR Insight (2010) 23, 27–43. doi:10.1057/ori.2009.7
Keywords: logistics; distribution network; analytic hierarchy process; mathematical model; multiple criteria optimization
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Vol. 23, 1, 27–43
Ho et al
Introduction The focus of this article is the optimization of a logistics distribution network problem in the contemporary supply chain. Distribution refers to the steps taken to hold and deliver products from a number of points of supply to a number of points of consumption, including suppliers, manufacturers, warehouses, distribution centres and customers. The connection of these various logistics stakeholders by means of transportation facilities is regarded as the logistics distribution network. In the past, when globalization was still in its infancy, competition was not fierce and the supply chain was not complex. A network that incurred the lowest total logistics cost (Su, 1998; Wasner and Za ¨pfel, 2004; Hwang, 2005) or required the least total delivery time (Su, 1999) was regarded as an optimal distribution network design. However, this kind of network cannot increase the competitive advantages of current companies. In addition to focusing on costs and time, sufficient attention must be paid to the customer services. In the contemporary supply chain, maximization of customer service is as important as mini
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