Facility Location Decisions in Supply Chain Management

Summary

Facility location decisions play a crucial role in the logistics activities involved in supply chain management. In real-life settings, the optimization of location and allocation decisions is often preceded by an evaluation of the existing distribution network system. Such an evaluation starts by assessing the quality of the current locations of the service facilities and the allocation of customer demands to those facilities. We propose several quick geometric tools for obtaining an initial configuration of the distribution network. In addition, we present different algorithms for strategic decision-making with respect to the construction of additional facilities whose location is determined without altering the sites of the already existing facilities. The proposed algorithms are embedded into the APO business application for supply chain modeling developed by SAP AG, the world’s largest supplier of business application software.