A Two-Echelon Location-inventory Model for a Multi-product Donation-demand Driven Industry

Abstract

This study involves a joint bi-echelon location inventory model for a donation-demand driven industry in which Distribution Centers (DC) and retailers (R) exist. In this model, we confine the variables of interest to include; coverage radius, service level, and multiple products. Each retailer has two classes of product flowing to and from its assigned DC i.e. surpluses and deliveries. The proposed model determines the number of DCs, DC locations, and assignments of retailers to those DCs so that the total annual cost including: facility location costs, transportation costs, and inventory costs are minimized. Due to the complexity of problem, the proposed model structure allows for the relaxation of complicating terms in the objective function and the use of robust branch-and-bound heuristics to solve the non-linear, integer problem. We solve several numerical example problems and evaluate solution performance.