Optimal Model and Algorithm for Multi-Commodity Logistics Network Design Considering Stochastic Demand and Inventory Control

Abstract A simultaneous approach that incorporates inventory control decision into facility location model is proposed, which is used to solve the multi-commodity logistics network design problem. Based on the assumption that the stochastic demands of the retailers are normal distributed, a non-linear mixed integer programming model that simultaneously described the inventory decision and the facility location decision is presented, in which the objective is to minimize the total cost that including location costs, inventory costs, and transportation costs under the certain service level. The combined simulated annealing (CSA) algorithm is developed to solve the problem. The model and effectiveness of the algorithm are clarified by the computational experiments.