LOCATION OF

DISTRIBUTION FACILITIES

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 INTRODUCTION

If you ask what to look for in

buying a house, any realtor will
tell you that there are three
things that are important :
location, location, location.

If we live within
walking distance of
the office ???
If our house is too
close to a factory ??

Reference : Daskin, Free Powerpoint

M.S. (1995) ,Network andTemplates
Discrete Location. Model, Algorithms, and
Applications, Wiley Inter-Science.
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Location decisions also arise in a variety of public and private sector
problems :
 Government needs to determine locations for bases for emergency
highway patrol vehicles, location of fire stations and ambulances, etc
 Private company must locate offices, plants, distribution centers and
retail outlets

The success or failure of both

private and public sector
facilities depends in part on the
locations chosen for those
facilities
Methods for
finding desirable
or optimal facility
locations ??

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 LOCATION MODELS
Mathematical location models are designed to address a number of
questions including :
 How many facilities should be sited

 Where should each facility be located ?

 How large should each facility be ?

 How should demand for the facilities’ services be allocated to

the facilities ?

The answers depend on the  Ambulance siting problems  as near

context in which the
location problem is being
solved and on the
objectives underlying the
problem.
as possible to the demand sites
 Radiactive waste repositories 
geologically stable region and as far as
possible from major population centers

OPTIMIZATION
PROBLEM
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 LOCATION PROBLEM

There are 4 types of location problem :

1. Covering Problem
2. Center Problem
3. Median Problem
4. Fixed Charge Location Problem.

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 I. COVERING PROBLEM

 Generally, service to customers depends on distance between the

facility and the customer
 Sometimes there is a critical value of distance that must not be
exceeded
 It leads to the notion of “coverage”
 Demand nodes are said to be covered if the shortest path
distance between the demand node and the facility is less than or
equal to a coverage distance (coverage distance is specified
exogenously)
 Set Covering Problem  to find a minimum number of facilities
needed from among a finite set of candidate facilities so that
every demand node is covered by at least one facility

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SET COVERING MODEL FORMULATION

 To show at least one facility cover demand at-i

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𝑀𝑖𝑛𝑖𝑚𝑖𝑧𝑒 𝑗 𝑓𝑗𝑋𝑗
subject to 𝑗 𝑎𝑖𝑗 𝑋𝑗 ≥ 1 ∀ 𝑖
𝑋𝑗 = 0 , 1 ∀𝑗
Distance
between i-j
j must be ≤
i coverage
distance
j

i i i Coverage
distance
j i
Only 3 facilities
i must be
i i
opened
j
4 facilities
i i must be
opened

1 𝑖𝑓 𝑐𝑎𝑛𝑑𝑖𝑑𝑎𝑡𝑒 𝑠𝑖𝑡𝑒 𝑗 𝑐𝑎𝑛 𝑐𝑜𝑣𝑒𝑟 𝑑𝑒𝑚𝑎𝑛𝑑𝑠 𝑎𝑡 𝑛𝑜𝑑𝑒 𝑖

𝑎𝑖𝑗 =
0 𝑖𝑓 𝑛𝑜𝑡
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 In location problems, the sets Ni (or, equivalently, the coefficients
aij) are often defined in terms of the distance between a demand
node-i and the candidate facilities.

 If we let Dc be the coverage distance, then we will have

aij =1 if dij ≤ Dc , or , equivalently, Ni = { j | dij ≤ Dc }

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 Example : 15
A C

8 12

10 B
11
𝑀𝑖𝑛𝑖𝑚𝑖𝑧𝑒 𝑗 𝑓𝑗𝑋𝑗
9
7 16 subject to 𝑗 𝑎𝑖𝑗 𝑋𝑗 ≥ 1 ∀ 𝑖
𝑋𝑗 = 0 , 1 ∀𝑗
E
11 13

D F
17

If we use a coverage distance of 11 units and restrict the candidate facilities

to be on the demand nodes, we obtain the set covering model as follows :

Min XA + XB + XC + XD + XE + XF

s.t. XA + XB + XD ≥ 1 (Node A covered)

Solution :
XA + XB + XD ≥ 1 (Node B covered)
XC = XD = 1 ,
XC + XE + XF ≥ 1 (Node C covered) XA = XB =XE =
XA + XB + XD + XE ≥ 1 (Node D covered) XF = 0
XC + XD + XE ≥ 1 (Node E covered)
XC + XF ≥ 1 (Node F covered)
XA, XB , XC , XD , XFree
E , XFPowerpoint
=0,1 (Integrality)
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 II. CENTER PROBLEMS
 It aims to minimize the coverage distance such that each demand
node is covered within the endogenously determined distance by
one of the facilities -- > P-center problem or a Minimax problem
( since we minimize the maximum distance between a demand and
the nearest facility to the demand)

SET COVERING PROBLEM MINIMAX OR CENTER PROBLEM

GIVEN: GIVEN:
Demand nodes Demand nodes
Candidate sites Candidate sites
Distances Distances
Coverage distance Number to locate, P

FIND : FIND :
Minimum number (and location of) Location of P facilities so that all
sites to cover all demand nodes demands are covered and coverage
distance is minimized
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p = 3  3 facilities opened p = 2  2 facilities opened

Maximum
Coverage
distance is
The minimized
minimum
“Maximum
coverage
distance”

The minimum
“Maximum
coverage
distance”
Coverage distance Coverage distance
Maximum Coverage distance Maximum Coverage distance
P–center problem distinguished into :
1. Absolute center problems
 The facilities can be located anywhere on the network
2. Vertex center problems
 The facilities can only be located on the nodes of the network

Example :
8
A B

If P=1 ;
For vertex center problems :
either node is optimal, max distance = 8
For Absolute center problems :
 Midway between nodes A and B is optimal;
max distance = 4

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VERTEX P-CENTER FORMULATION

 Demand at-i may be served by more than 1 facility

 Total number of facility is P

 There will be no demand between i-j if j is closed

 To restraint of serving i by more than 1 facility

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 III. MEDIAN PROBLEMS
In Covering and Center Problem 
A demand node receives complete benefits from a facility if it is
within the coverage distance and no benefits if the distance between
the demand node and the nearest facility exceeds the coverage
distance

Relative Benefit

0.5

0
Distance
Covered Uncovered

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coverage distance Page 15
In many cases, the benefit (cost) associated with a demand
node/facility pair decreases (increases) gradually with the distance
between the demand and nearest facility.

Cost
Convex Linear
4

3
Concave
2

0 Distance
0.5 1 1.5 2

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P-MEDIAN PROBLEM FORMULATION

 Distance ~ cost ; Minimizing total demand x cost

 Demand at-i is served by only one facility
 Total number of facility is P
 There will be no demand between i-j if j is closed

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 𝑀𝑖𝑛𝑖𝑚𝑖𝑧𝑒 ℎ𝑖 𝑑𝑖𝑗 𝑌𝑖𝑗
𝑖 𝑗

ℎ𝑖 : demand at node - i
𝑑𝑖𝑗 : distance from demand node i to candidate facility site j

p = 2  2 facilities opened
i

j j
i

i
i
j

i i
i

j
i
i
FIXED CHARGE FACILITY LOCATION PROBLEMS

 In the previous models, the cost of constructing a facility is not used

explicitly in the model and it is the same at each candidate facility
site.
 This is not always a valid assumption.

Cost

Total Cost

Fixed Cost

Transport Cost

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Number of Facilities
2 4 6 8 10
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UNCAPACITATED FIXED CHARGE FACILITY
LOCATION PROBLEMS
Facility cost Transportation cost
 Minimize facility cost & transp cost

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CAPACITATED FIXED CHARGE FACILITY
LOCATION PROBLEMS

 Total demand of all demand node-i

must be less than capacity of j

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Such problems could be solved by some techniques of
solving the uncapacitated (capacitated) fixed charge
location problem . One of them is LINGO.

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 the end…

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