The hybrid planning algorithm for the distribution center operation using tabu search and decomposed optimization

Distribution center operation planning problem to determine the facility locations and the distribution plans is studied in this paper under the single sourcing constraint, in which each customer can be served by a single supplier. Distribution centers can be installed or changed easily using the outsourcing with a reasonable setup cost, to meet the dynamically changing demand of customers, compared with the plants which are usually run for the long time period with a heavy setup cost. The objective is to minimize the sum of transportation, the facility setup and the product handling cost. A mixed integer programming model for the distribution center operation planning is suggested. For the purpose of practical implementation, the hybrid heuristic based on the tabu search and the decomposed optimization is proposed with the priority rule designed by using the so-called Unit Cost Ratio (UCR). The performances of the heuristic algorithms are evaluated by the comparison with the optimal solution or the best solutions found within the computational time limit by CPLEX.