A Decomposition Approach to Solve Large-Scale Network Design Problems in Cylinder Gas Distribution

Abstract

The logistics network has to be optimally designed for an effective supply chain. The focus of this research is to solve network design problem occurring in packaged gases (e.g., cylinder) supply chain. The integrated logistics network design problem for packaged gases is defined as follows: given a set of potential locations for filling plants and hubs, and customers with deterministic demands, determine the configuration of the production-distribution system i.e., optimal facility locations, the filling plant production capacities, the inventory at plants and hubs, and the number of packages to be routed in primary and secondary transportation. The problem is modeled as a deterministic mixed integer program and a decomposition approach is developed which allows a natural split of the production and distribution decisions. The proposed framework is illustrated with numerical examples from real-life packaged gases supply chain. The results show that the decomposition approach is effective in solving a broad range of problem sizes. The results from the decomposition approach are benchmarked by solving optimally the whole packaged gases network design model for smaller test cases. In the end, we perform sensitivity analysis for parameters that are likely to change in the future for better understanding of their impact.