International Journal of Production Economics 183 (2017) 710–720

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Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

A robust design for a Colombian dairy cooperative's milk storage and MARK
refrigeration logistics system using binary programming
⁎
Rafael Tordecilla-Maderaa, ,1, Andrés Poloa,1, Dairo Muñoza,2, Leonardo González-Rodríguezb,3
a
Innovar Tecnológico Research Group, Industrial Engineering Program, Fundación Universitaria Agraria de Colombia, Calle 170 #54A-10, Bogotá,
Colombia
b
Logistic Systems Research Group (Grupo de Investigación en Sistemas Logísticos), Faculty of Engineering, Universidad de La Sabana, Chía, Colombia

A R T I C L E I N F O A BS T RAC T

Keywords: This article describes a robust design for a milk storage and refrigeration logistics system for a dairy cooperative
Robustness located in the Ubaté region of Colombia using a binary programming model. Such design included cooling tank
Cost location, assigning producers to the tanks and calculating system capacity. This research was aimed at
Binary programming identifying the most robust and cost-efficient configuration (given the design's parameters).
Milk cooling tanks
Perturbation parameters, robustness requirements and performance features were thus qualitatively and
Location
quantitatively identified; the perturbation parameters’ impact on robustness requirements and performance
features was also determined. A supply chain involves a variety of configurations, along with variations in milk
supply (perturbation parameter). The most robust configuration and associated costs were thus identified
through robustness-cost characterization and used for designing the dairy cooperative's logistical storage and
refrigeration system. A tactical plan was also drawn up for optimizing cooling tank use.
Our main theoretical conclusion regarding this matter (depending on how robustness requirements and
perturbation parameters are defined and calculated) suggested that the most robust system does not necessarily
represent higher costs because the most robust configurations were in fact the least costly concerning high milk
supply values.

1. Introduction
According to Colombia's 2011–2014 Development Plan (Prosperity
for all), the country must have an annual 6% socially and environmen-
tally sustainable growth rate during the aforementioned period
(Departamento Nacional de Planeación DNP, 2011). The initiatives
adopted for achieving this goal included Pacific Alliance and Andean
Community of Nations free trade agreements which were aimed at the
growth of small- and medium-sized businesses’ exports by stimulating
association-based collaboration. Colombia's agricultural sector reflects
its government's commitment to exploiting Colombian plantations’
inherent wealth and harnessing their potential for consolidating growth
and improving competitiveness, diversifying production, expanding
markets, and improving farmers’ working conditions and income. The
Colombian government has implemented commercial policies aimed at
improving farmers’ income to stimulate internal markets and allocate
public goods and services; however, the rural sector has yet to take
suitable advantage of these resources.
The Colombian dairy sub-sector faces a series of challenges regard-
ing its successful entry to the international market and consolidation
within the internal market. The National Council for Economic Policy
(CONPES) has introduced policies for improving this sector's competi-
tiveness (Consejo Nacional de Política Económica y Social, 2010).
CONPES document 3675 was aimed at improving the Colombian dairy
sector's competitiveness by developing strategies aimed at reducing
production costs, increasing productivity, promoting collaborative
schemes, and strengthening the sector's institutional administration.
Such policy also sought to improve sanitary and safety measures for
strengthening competitiveness, improving public health, and gaining
access to national and international markets; analysis has thus been
undertaken at each level in the production chain, including associa-
tions/cooperatives representing the production, storage, transporta-

⁎
Corresponding author.
E-mail addresses: tordecilla.rafael@uniagraria.edu.co, rafaeldtm@hotmail.com (R. Tordecilla-Madera), polo.andres@uniagraria.edu.co (A. Polo),
munoz.dairo@uniagraria.edu.co (D. Muñoz), leonardo.gonzalez1@unisabana.edu.co (L. González-Rodríguez).
1
Full-time professor, Fundación Universitaria Agraria de Colombia.
2
Young Researcher, Industrial Engineering Program.
3
Full-time professor, Universidad de La Sabana.

http://dx.doi.org/10.1016/j.ijpe.2016.09.019
Received 30 December 2014; Received in revised form 18 September 2016; Accepted 25 September 2016
Available online 28 September 2016
0925-5273/ © 2016 Elsevier B.V. All rights reserved.
R. Tordecilla-Madera et al.
tion, manufacturing and commercialization sectors, as well as those
entities responsible for inspecting production, overseeing and control-
ling the processes so involved, and the sale of milk and other dairy
products.
Specialized companies produce most of the commercially available
milk in Colombia; this is beneficial for small- and medium-sized
businesses, primarily in the country's cold regions close to consumer
centers. Current government policies for consumer groups require in-
depth analysis of milk production and distribution in certain regions of
the Boyacá and Cundinamarca departments, especially on the savannah
of Bogotá and in the Ubaté region (the target area for this study).
Cooperatives have been established in these regions, acting as inter-
mediaries between local farmers and the dairy industry. Supply chain
operators sometimes provide cooperatives with the required physical
resources, such as goods, equipment and transport. The target area
typically consists of small properties in rural areas having limited access
to vehicles and poor raw milk storage conditions/availability; moreover,
these dairy cooperatives lack production goals, good production prac-
tices and performance records for their cows’ milk production.
However, the greatest obstacle regarding raw milk supply is the lack
of appropriate transport for sending the product to the processing
centers. A cold chain for slowing down or preventing microbiological
(microorganism growth), physiological (ripening), biochemical (brown-
ing, lipid oxidization) and/or physical changes (e.g., moisture loss) in
the product is currently not available. Actual collection conditions in the
Ubaté region prevent raw milk from being used in pasteurized milk
production and such milk may be rejected or used for producing low–
quality cheese, thereby constituting economic loss for the cooperatives.
The diversity of conditions represents an obstacle for supply chain
operators because it complicates how their recommended techniques
might become adopted by local farmers to meet set quality and volume
requirements and avoid seasonal fluctuations.
Seminars on good farming practice have been organized to improve
these conditions and contribute towards increasing daily milk produc-
tion quotas. Economic assistance has been provided so that farmers can
invest in equipment for handling raw milk and milking machines. The
government and private entities have offered raw milk cooling tanks to
improve milk collection and storage and preserve milk quality and
safety.
An efficient cold chain is designed to provide the best possible
conditions for avoiding or delaying changes in milk for a sufficiently
long period of time (James and James, 2010) and such design must
consider intrinsic dairy production variations in mountainous regions
similar to those in the Ubaté region, including the daily production of
milk per cow, the distances to be covered regarding milk delivery, and
the necessary amount of cooling tanks and their corresponding
capacity. Such parameters are fundamental and must be carefully
considered for suitably placing tanks in a production network. The
greatest challenge in designing a raw milk distribution network invol-
ving a cold chain is related to the seasonal and geographical fluctuations
of milk production in the target area (i.e. Ubaté) as well as variability
regarding product demand because of unstable economic conditions.
An inability to manage such uncertainties may lead to either an
unfeasible design or sub-optimal supply chain performance (Tong
et al., 2014).
The strategic goal of supply chain design is to determine a
configuration which optimizes long-term performance within a specific
planning horizon (Huang and Goetschalckx, 2014). This article de-
scribes how a raw-milk supply chain was configured for efficiently
managing a variety of future scenarios, involving decision-making in
line with strategic planning under uncertainty. The supply chain has
been configured through a robust design and future uncertainty has
been modeled using the aforementioned scenarios (Peterson et al.,
2003).
This paper's novel contribution lies in adopting Tordecilla-Madera,
& González-Rodríguez's methodology (2014) regarding a strategic
711
International Journal of Production Economics 183 (2017) 710–720
location problem in which a minimal cost, robust design was offered
to a dairy cooperative. This methodology had originally been devised for
a theoretical model for characterizing the relationship between robust-
ness and cost concerning capacity planning and warehouse location
within supply chains; however, this paper focuses on its practical
application to a real supply chain design-related problem.
This article is organized as follows: Section 2 reviews related works,
Section 3 gives the methodology and explains the binary programming
model used as design tool, Section 4 gives the results and analysis of the
methodological implementation based on real data provided by the
cooperative and Section 5 contains our conclusions and suggestions for
future research.
2. Literature review
Uncertainty is an important factor when planning supply chains; it
may influence configuration and coordination efficiency and signifi-
cantly affect performance (Peidro et al., 2009); however, few studies
have considered this factor. A review by Melo et al. (2009) found that
20% of all publications have considered stochastic variables, whereas a
review by Mula et al. (2010) stated that 30% of studies have considered
uncertainty.
Such apparent lack of research indicates that uncertainty is fre-
quently ignored in studies investigating supply chain-associated pro-
blems. Blackhurst et al. (2004) considered supply chains’ dynamic
nature and corresponding uncertain demand as causes of the inherent
complexity within such chains; several authors have suggested that
ignoring uncertainty may have a negative effect on supply chains (Gupta
and Maranas, 2003; Jung et al., 2004).
One method of managing such uncertainty is by considering the
concept of robustness. A survey of the literature concerning supply
chain robustness (Vlajic et al., 2010) revealed that the organizational
design of robust supply chains is not guided by an integral framework;
they also indicated that robustness can be considered at conceptual,
qualitative and quantitative model levels. Vlajic et al. (2012) have
suggested that robustness is an important qualitative supply chain
property which can be used for improving resilience. Robustness is thus
mainly related to overcoming a chain's vulnerabilities caused by a
variety of general interruptions (Tang, 2006; Wieland and Wallenburg,
2013) and uncertainties. Quantitatively, robustness is primarily con-
sidered according to supply chain problems, such as planning (Zapfel,
1998; Van Landeghem and Vanmaele, 2002; Goetschalckx and
Fleischmann, 2005; Leung et al., 2007; Komoto et al., 2011), program-
ming (Kutanoglu and Wu, 2004; Adhitya et al., 2007), network design
(Peng et al., 2011; Mo and Harrison, 2005; Meepetchdee and Shah,
2007), and inventory management (Tee and Rossetti, 2002; Ouyang,
2007; Kastsian and Mönnigmann, 2011).
Santoso et al. (2005) have stated that unless supply chain design is
robust regarding uncertain operational conditions, then the impact of
operational inefficiency, such as delays and interruptions, will always be
increased. Genin et al. (2008) focused on robustness regarding deci-
sion-making aimed at delivering more stable results accompanied by
low variability concerning key performance indicators (KPIs).
Bertsimas and Sim (2004) indicated that a robust solution is immune
to uncertainty regarding available data. Klibi et al. (2010) focused on a
specific definition of robustness for supply chains, asserting that
robustness is supply chain ability to remain effective in all potential
scenarios. Vlajic et al. (2012) defined supply chain robustness as a
desirable property which is reflected in its performance; robustness can
thus be viewed as the degree to which a supply chain shows acceptable
KPI values during and after an unexpected event that perturbs one or
more logistical processes. Ali et al. (2004) defined robustness as the
preservation of certain of a system's desired characteristics despite
fluctuations in the behavior of its components or environment.
Ali et al. (2004) proposed a methodology referred to as the features,
perturbation, impact, analysis (FePIA) procedure for use as a measure
R. Tordecilla-Madera et al. International Journal of Production Economics 183 (2017) 710–720

of robustness (i.e. this procedure can quantitatively determine how
robust a system is). The present article describes how the methodology
proposed by Tordecilla-Madera and González-Rodríguez (2014), based
on Ali et al. (2004), was applied to a real-life situation. Tordecilla-
Madera and González-Rodríguez (2014) originally used a theoretical
model regarding supply chain design; however, such methodology has
been used in the present work for locating a dairy cooperative's cooling
tanks in the Ubaté region, taking an uncertain raw milk supply into
consideration. Our work thus contributes to the field of determining
supply chain robustness because, to the best of our knowledge, the
FePIA procedure has not been applied in this context.
3. Methodology
Tordecilla-Madera and González-Rodríguez (2014) introduced a
methodology based on work by Ali et al. (2004). They used a theoretical
model for characterizing the relationship between robustness and cost
regarding supply chain capacity planning and warehouse location,
which involved four stages and was applied in the present article to
the specific problem of the cooperative. However, since this was a real-
world problem, a fifth stage had to be included to complete the system's
design; this last stage was very specific to the matter in hand,
concerning a tactical plan for optimizing cooling tank use. Binary
programming was used for designing this system; the input for the
model was based on real data provided by the dairy cooperative.
3.1. Mathematical model
The mathematical model used here was based on work by Sánchez
and Muñoz (2014), adapted to the present study's specific character-
istics (i.e. suitably locating cooling tanks so that the producers could
store the milk they produced daily). The dairy cooperative involved 41
milk producers and the tanks had to be placed on the producers’
properties (not in uninhabited locations) to ease handling and main-
tenance. The system network thus consisted of only one type of node
(producers’ nodes). The system's optimum number of tanks and the
total capacity to be installed were determined by the model to minimize
total cost, meaning that any producers on whose property a cooling tank
was not located had to transport their milk. Several producers had
therefore to transport their milk (on foot or by donkeys) to the same
tank, this group of producers being referred to as a “cluster” in our
work.
Our model only contained binary variables, certain variables
determining whether a cluster was created, whereas other variables
specified whether a producer belonged to a created cluster. The location
model sought to minimize costs and optimize cooling tank position, one
for each created cluster. Fig. 1 shows producers’ geographical distribu-
tion, including their respective latitudes and longitudes. The number
assigned to each node was chosen by the authors for labeling each
producer and the coordinates were collected in situ using a global
positioning system (GPS).

Based on the above distribution, the authors designed the following location model:

• Sets
i = indicates the producer ; i = 1, 2, …, 41
j = indicates the possible cluster; j =1, 2,…,41
k = indicates cooling tank type according to its capacity; k =1, 2,…,10

• Parameters
SDailyi = daily milk supply [liters] of producer i
AHi = abscissa of producer i
OHi = ordinate of producer i
Xj = abscissa of the location of the storage center corresponding to
cluster j
Yj = ordinate of the location of the storage center corresponding to
cluster j
Dij = linear distance [km] between producer i and storage center j :
Dij =110. 6* (Xj − AHi )2 + (Yj − OHi )2
CPCk = capacity [liters] of a tank of type k
CAk = daily depreciation cost (Col $/day) of a tank of type k
CINk = depreciation cost (Col $/day ) of the infrastructure of a tank type
k
CRFk = refrigeration cost (Col $/liter ) of tank type k
SD = daily wage (Col $/day ) of an employee maintaining a cooling tank
and its infrastructure
CTR = transportation cost of one liter of milk (Col $/(km. liter ))

• Variables
Zjk = binary variable specifying whether cluster j of capacity k is
created (Zjk =1) or not (Zjk =0)
Wijk = binary variable specifying whether producer i belongs (Wijk =1)
or not (Wijk =0) to cluster j of capacity k

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R. Tordecilla-Madera et al. International Journal of Production Economics 183 (2017) 710–720

Fig. 1. The milk producers’ geographical location.

• Objective function
Min TC = total cost (Col $/day ) Min TC Fig. 2. Flow diagram regarding the methodology.
41 41 10
∑ ∑ ∑ (CTR*SDailyi*Dij*Wijk )
• Stage 2. The impact of π on Γ
=
i =1 j =1 k =1 s and φr is determined to identify the
41 10 basic configurations that should be adopted by the chain for the
+ ∑ ∑ [(CAk + CINk + SD )*Zjk ] instances being studied;
j =1 k =1
41 41 10
• Stage 3. The impact of π on Γs and φr is determined once again for
each configuration;
+ ∑ ∑ ∑ (CRFk*SDailyi*Wijk )
i =1 j =1 k =1 (1)
• Stage 4. The robustness-cost relationship is characterized from the
results and a configuration is chosen according to this characteriza-
• Constraints tion. The chosen configuration must be used for locating and
constructing the cooperative's tanks; and
41 • Stage 5. A tactical plan is designed for tank use once their locations
∑ SDailyi*Wijk ≤ CPCk*Zjk ∀ j, k have been chosen and they have been constructed; this plan also
i =1 (2) depends on milk supply level.
41
∑ SDailyi*Wijk ≥ 0.7*CPCk*Z jk ∀ j, k 3.2.1. Stage 1. Preliminary description of the supply chain
i =1 (3) This stage consists of the qualitative and quantitative description of
41 10 robustness requirements, performance features and perturbation para-
∑ ∑ Wijk = 1 ∀ i meters. Robustness requirement is an interval associated with one or
j =1 k =1 (4) more indicators and it indicates whether a supply chain is operating
10 correctly. Many performance measures can be found in the literature
∑ Zjk ≤ 1 ∀ j for generic supply chains (Chan, 2003; Gunasekaran et al., 2004) and
k =1 (5) agri-food supply chains (Aramyan et al., 2007); the latter have proposed
that shelf life be a performance measure for agri-food supply chains,
∀ Zjk , Wijk ∈ {0, 1} (6)
this being the time interval between harvest or packaging and the
moment the item becomes unfit for consumption. The scope of the
Eq. (1) indicates the objective function which seeks to minimize present investigation means that shelf life refers to the time elapsing
supply chain total cost, including transport, operation and refrigeration between milking cows and refrigerating their milk in the corresponding
costs. These three cost terms have similar magnitude; therefore, there is tanks. Two robustness requirements associated with this indicator must
not imbalance between them. Eq. (2) states that the total amount of thus be defined: average distance (Γ1 (km)) traveled by each producer
milk transported to a cluster cannot exceed the capacity of the when transporting milk from their properties to the cooling tanks and
corresponding tank. Eq. (3) sets the minimum capacity required per the distance weighted by the volume of milk transported (Γ2 (km*liter))
cooling tank (a cooperative management requirement), meaning that at by each producer from their property to a cooling tank. Time has not
least 70% of the capacity of any tank placed in this scheme must be been treated directly to simplify handling the variables (as defined by
used. Eq. (4) ensures that each producer belongs to only one cluster. Eq. Aramyan et al., 2007); distances have been used instead. The system
(5) ensures one cooling tank for each cluster. Eq. (6) indicates that all has been considered more robust for smaller distance values due to the
the model's variables are binary. relationship between time and distance. Eqs. (7) and (8) illustrate
robustness requirements mathematically:
3.2. Proposed methodology 41 41 10
∑i =1 ∑ j =1 ∑k =1 Dij *Wijk
Γ1 =
The proposed methodology was divided into five stages (Fig. 2). 41 41
∑i =1 ∑ j =1 ∑k =1 Wijk
10
(7)

• Stage 1. Robustness requirements (Γs), performance features (φr) 41 41 10

∑i =1 ∑ j =1 ∑k =1 SDailyi*Dij *Wijk
and perturbation parameters (π) are qualitatively and quantitatively Γ2 = 41 41 10
described; ∑i =1 ∑ j =1 ∑k =1 Wijk (8)

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R. Tordecilla-Madera et al. International Journal of Production Economics 183 (2017) 710–720

Performance features had to have limited variation so that the the mathematical model when calculating the perturbation parameter,
described robustness requirements were met (Ali et al., 2004); the would thus range according to Eq. (12), in which δ is a parameter
following performance features were considered based on the model varying from zero (0) to ten (10). Total input for the model consisted of
described above: 11 SDailyi( ∀ i ) values, varying linearly and proportionally through all
the possible values, according to the pertinent literature:
• Number of created clusters (φ1): indicates the number of ⎡
SDailyi = ⎢6 +
δ*(25 − 6) ⎤
clusters that must be created according to each supply scenario. ⎣ ⎥⎦*NCi ∀i
10 (12)
The number of created clusters is defined in Eq. (9):
41 10
3.2.3. Stage 3. Determining the behavior of each identified
φ1 = ∑ ∑ Zjk
j =1 k =1 (9) configuration
The results from Stage 2 specified a chain configuration for each
• Total installed capacity (φ2 ): refers to the sum of the total considered value regarding average supply π (11 values in total);
capacities of all tanks installed in the system. Total installed capacity however, the same configurations were observed for certain values of
is defined in Eq. (10): π, a total of eight distinct configurations thus being obtained. Additional
restrictions forced the model to adopt each configuration and, for each
41 10 configuration, π was varied once more using the 11 values considered in
φ2 = ∑ ∑ CPCk*Zjk the previous stage. Furthermore, installed capacities were not fixed, this
j =1 k =1 (10) being consistent with the definition of “configuration” provided in
Section 3.2.1. The following modifications were thus made to the model:
• Supply chain configuration (φ3): indicates the number of
1) A new known parameter aj , which is a binary matrix indicating
clusters to be created, along with the precise location of each cooling
tank and information regarding whether a tank belongs to each whether a tank is (aj =1) or is not (aj =0 ) located in the cluster j, was
cluster after the model algorithm has been run (with corresponding introduced; and
modifications in input variables). Such definition does not include 2) Eq. (5) was replaced by Eq. (13), forcing the model to adopt a
installed capacity. Section 4 gives examples of what a configuration specific configuration and allowing for behavioral analysis of each
is; compared to the previously defined features, supply chain configurations in terms of Γs, φr and total cost (TC) as supply varied
configuration is a qualitative feature. [Eqs. (11) and (12)]:
10
Perturbation parameters refer to uncontrollable variables which are ∑ Zjk = aj ∀ j
subject to uncertainty and affect a system's performance features and, k =1 (13)
therefore, its robustness (Ali et al., 2004). According to Peidro et al.
(2009), there are three sources of uncertainty in a supply chain: supply,
3.2.4. Stage 4. Characterizing the robustness-cost relationship
processing-manufacturing, and demand. The only source of uncertainty
The different parameters’ relationships were graphically analyzed
considered in the current work was associated with processing because
once Γs, φr and TC had been determined separately for each config-
of great variability concerning milk production by the cattle in the target
uration according to controlled variation in total daily milk supply (π).
area. Total daily milk supply was thus taken as the only perturbation
The most relevant parameters for characterizing the robustness-cost
parameter for the system, as shown in Eq. (11):
relationship were as follows:
41
π= ∑ SDailyi • Total daily supply (π) compared to average distance covered (Γ1);
•
i =1 (11)
Total daily supply (π) compared to average weighted distance
Table 1 summarizes the aspects discussed in Stage 1. covered (Γ2); and
• Total daily supply (π) compared to total cost (TC)
3.2.2. Stage 2. Identifying the impact of perturbation parameter π on
robustness requirements Γs and performance features φr These plots determined the most robust configurations or config-
Supply (π) is varied in this stage in a controlled manner to identify urations having the greatest capability to maintain average distance and
robustness requirements Γs and performance characteristics φr pat- average weighted distance within acceptable limits, along with the cost
terns. Work by Sánchez and Muñoz (2014) was considered for such of achieving these configurations, thereby indicating the cost of
variation; the number of heads of cattle owned by each producer in the guaranteeing the greatest robustness for a given configuration.
cooperative (NCi ) was determined through surveys, whereas work by
Fonseca Carreño et al. (2013) was used for establishing that one cow's 3.2.5. Stage 5. Tactical plan regarding tank use
daily production could range from 6 to 25 l, depending on conditions Once the best configuration had been selected in terms of robust-
such as climate, diet, technological infrastructure and production ness-cost relationship, the cooperative would have had to install the
system. Supply (SDailyi ) in the mathematical model, used as input for infrastructure on each selected property and locate the cooling tanks.
This stage also involved determining the methods by which the tanks
Table 1 would be used for the 11 scenarios regarding different values of π.
Aspects defined in Stage 1. Compared to Stage 3, installed capacities were fixed. The following
modifications were thus made to the model:
Robustness Performance Perturbation
requirement Γs characteristics φr parameter π
1) A new known parameter bjk was introduced, being a binary matrix
Γ1: average distance φ1 = amount of created Total daily milk indicating whether a tank of capacity k was (bjk =1) or was not (bjk =0 )
clusters supply located in cluster j;
Γ2: average weighted φ2 = total installed
2) A new variable BAj was introduced, being a binary variable indicat-
distance capacity
φ3 = supply chain ing whether a tank located in cluster j was used (BAj =1) or not
configuration (BAj =0 );

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R. Tordecilla-Madera et al. International Journal of Production Economics 183 (2017) 710–720

3) Eq. (1), the objective equation, was replaced by Eq. (14):

41 41 10
MinTC = ∑ ∑ ∑ (CTR*SDailyi*Dij *Wijk + CRFk*SDailyi*Wijk )
i =1 j =1 k =1
41 10 10
+ ∑ ∑ (SD*Zjk ) + ∑ (CAk + CINk )
j =1 k =1 k =1 (14)
Compared to Eq. (1), the costs associated with tank and infrastruc-
ture depreciation were always incurred in Eq. (14) and did not depend
on whether the tank was used or not;
4) Eq. (5) was replaced by Eq. (15), allowing a tank to be used
depending on supply level on a given day
Zjk = bjk *BAj ∀ j, k (15)
and
5) Eq. (3) was discarded as minimum tank capacity use was no longer Fig. 3. Configuration for π=2622 l.
tactically required because during low milk production periods
certain tanks would not be used or only filled to a small percentage
of their real capacity.

4. Results and discussion

The problem regarding different scenarios was solved on a computer

(Intel Core i3 2.20 GHz processor and 2.00 GB RAM) using GAMS and
CPLEX solver and binary programming. Stage 2 runs were based on
Stage 1 characterization (Table 1) and equivalent values between δ and
π (Table 2) were obtained and remained constant throughout the
remainder of the experiment. Given the number of producers and their
heads of cattle, the minimum volume of milk which could have been
produced on any given day would have been 2622 l, whereas the
maximum volume might have reached 10,925 l. As supply grew, the
average number of kilometers traveled (Γ1) would have become
reduced because more clusters (φ1) would have been created and the
tanks would have become closer to the milk producers; total cost (TC)
and total installed capacity (φ2) of the installed cooling tanks would Fig. 4. Configuration for π=4282.6 l.

also have increased.

Figs. 3–10 give the eight configurations adopted by the system after
the runs. Each tank's location in a cluster is indicated by a red dot and a
producer by a blue dot and shown with its considered total supply value.
There are only eight configurations because certain supply values gave
identical configurations, indicating that the tanks were located in areas
having the same properties, even if the assignment of the producers was
different. These configurations are labeled A–H in Table 3 along with
their relationship to parameter π.
At this point, each configuration (A to H) was analyzed individually
and π was initially plotted against Γ1 for each identified configuration.
Fig. 11 shows this plot; each configuration had a slight decrease in
average distance because tank locations were fixed for each configura-
tion; significant variation was thus not observed for the distance
traveled by the producers. However, this slight change was not observed
for the scenario having the lowest supply for configurations E, F, G and
H, having high Γ1 value because the minimum 70% volume for each
tank could not be met when many clusters were created. Producers
would therefore have to travel greater distances.
Fig. 12 shows π compared to Γ2 and, for all configurations, the
average weighted distance grew almost linearly with total supply,
whereas the slope was not the same for all configurations (while
configuration A had the greatest slope, configurations G and H had
the smallest). This result was caused by configuration A only creating
four clusters, whereas G and H created eight; producers would thus
have had to travel shorter average distances..
Figs. 11 and 12 show that configurations G and H were the most
robust for almost all scenarios except the lowest supply scenario, for
which both plots gave the lowest values for Γ1 and Γ2. However, these
results did not indicate that either configuration should be adopted by
the cooperative because the cost pattern for each configuration still had
to be analyzed. Fig. 13 shows π plotted against TC and indicated that G
and H configurations’ greater robustness only produced a higher cost

Table 2
Results of the first runs performed with the proposed methodology.

Output variable Parameter δ

0 1 2 3 4 5 6 7 8 9 10

π (liters/day) 2622.0 3452.3 4282.6 5112.9 5943.2 6773.5 7603.8 8434.1 9264.4 10,094.7 10,925.0
Γ1 (km) 1.45 1.41 1.26 1.06 1.08 1.05 0.93 1.04 0.95 0.88 0.85
Γ2 (km*liter) 87.33 112.76 117.82 113.88 135.71 154.06 147.06 186.37 180.55 174.13 187.49
TC (Col$/day) 476,998 562,870 651,193 711,694 783,233 847,442 901,647 961,550 1,016,199 1,078,124 1,109,953
φ1 (no. of created clusters) 4 4 5 6 6 6 7 6 7 8 8
φ2 (liters) 3500 4500 5500 6500 8000 8500 9500 11,000 12,000 12,500 15,000

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R. Tordecilla-Madera et al.
Fig. 5. Configuration for π=5112.9 l.
Fig. 6. Configuration for π=6773.5 l.
Fig. 7. Configuration for π=7603.8 l.
for small supply values (between π=2622.0 and 5943.2 l). Regarding
higher supply values, G and H configuration costs became reduced as
the highest demand was reached, producing the lowest cost for all
configurations..
Based on these results, it was suggested to the cooperative that the
cooling tanks should be located according to either configuration G or
configuration H, having the highest robustness and involving shorter
average distances and weighted distances from the producers’ proper-
ties to the cooling tanks, as well as lower management costs for most
supply scenarios. Improved robustness implied shorter transport times
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International Journal of Production Economics 183 (2017) 710–720
Fig. 8. Configuration for π=9264.4 l.
Fig. 9. Configuration for π=10,094.7 l.
Fig. 10. Configuration for π=10,925.0 l.
and improved milk quality due to prolonged shelf life.
Figs. 11, 12 and 13 show that the differences between configurations
G and H were virtually imperceptible; thus, an additional criterion was
required to choose between them. Table 2 thus shows that φ2 values
were then specifically considered (the last two columns in the table are
for configurations G and H); φ2 =12,500 l for configuration G, whereas
φ2 =15,000 l for configuration H. These results indicated that config-
uration G should be recommended because configuration H implied a
larger amount of non-utilized capacity for a maximum total supply of
10,925 l, this being undesirable for the dairy cooperative in question.
R. Tordecilla-Madera et al. International Journal of Production Economics 183 (2017) 710–720

Table 3
Configurations adopted by the system.

Configuration A B C D E F G H

Total supply (π) 2622.0 4282.6 5112.9 6773.5 7603.8 9264.4 10,094.7 10,925.0
3452.3 5943.2
8434.1

Table 4
Capacity to be installed at the producers’ properties according to configuration G.

Producer number Installed capacity (liters)

10 1500
12 3000
24 2000
30 1000
31 1000
37 500
38 1500
39 2000

Fig. 11. π compared to Γ1 for each configuration.

assignment was not fixed and could vary depending on supply levels for
a given period of time.

4.1. Tactical plan for tank use

The last stage of this study consisted of drawing up a plan for

Fig. 12. π compared to Γ2 for each configuration.
Fig. 13. π compared to TC for each configuration.
Table 4 gives the details regarding configuration G, indicating the
producers and capacity associated with each tank. Fig. 9 gives the
locations and also shows the producers assigned to each cluster. This
installed tank use regarding the different supply scenarios. The model
produced three scenarios after the 11 runs described in Section 3.2.5;
Table 5 summarizes the results. The first scenario concerned the lowest
supply and involved using five tanks; the second scenario concerned the
next three supply values and involved using seven tanks whilst the third
scenario dealt with the seven largest supply values and included the use
of eight installed tanks. Greater supply required more tanks due to
necessarily larger capacities and the cost structure. Thus, for scenarios
involving lower demand, it would be less costly for producers to travel
longer distances than to use some of the tanks; these tanks would thus
not be used in such scenarios.
Table 6 summarizes the tank utilization plan. An approximate range
was established according to the π values in Table 5. Tanks 10, 12, 24,
38 and 39 were thus used for any supply value; tanks 30 and 31 were
only used when supply was medium or high, and tank 37 was only used
in the high supply scenario. The tanks that were not used in low and
medium supply scenarios were those having the lowest capacity,
according to Table 4 which indicates that the model tended to involve
using the higher-capacity tanks because of the cost structure and lower-
capacity tanks being used for storing milk from fewer producers. The
latter scenario would inevitably require the use of larger tanks, thereby
increasing long-term management costs.
Assigning producers to each tank or cluster also had to be
considered. Although the model produced three scenarios, the high-
supply scenario contained three sets of assignment (Figs. 14–18), along
with the sets for scenarios 1 and 2. Figs. 14 and 15 show that five and
seven clusters were formed, respectively. A red dot identifies a tank in
use and a dark blue dot identifies tanks which have been installed but
are not being used because of low supply values......
Figs. 16–18 show the three sub-scenarios regarding the high-supply
scenario. They show all eight tanks being used but different producer
assignments. This situation would reflect installed capacity because
certain tanks would no longer be able to receive milk as supply
increased; however, since total system capacity would be sufficient,
the producers could be reassigned.

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R. Tordecilla-Madera et al. International Journal of Production Economics 183 (2017) 710–720

Table 5
Tactical plan results.

Output variable Scenario

1 (Low supply) 2 (Medium supply) 3 (High supply)

π (liters/day) 2622.0 3452.3 4282.6 5112.9 5943.2 6773.5 7603.8 8434.1 9,264.4 10,094.7 10,925.0
Γ1 (km) 1.35 0.92 0.92 0.92 0.83 0.83 0.83 0.83 0.83 0.86 0.91
Γ2 (km*liter) 72.99 66.96 83.06 99.16 99.74 113.68 127.61 141.55 155.48 172.65 203.75
TC (Col$/day) 465,176 543,960 608,656 673,352 736,821 796,868 856,915 916,962 977,008 1,044,360 1,142,795
φ1 (no. of tanks to be used) 5 7 7 7 8 8 8 8 8 8 8

Table 6
Utilization plan for tanks located according to supply range.

Producer Supply range (liters/day)

number
Low supply Medium supply High supply

(2662– (3037.2– (5528.1–

3037.2) 5528.1) 10,925)

10 X X X
12 X X X
24 X X X
30 X X
31 X X
37 X
38 X X X
39 X X X

Fig. 16. Assignments for the first high-supply sub-scenario.

Fig. 14. Assignments for the low-supply scenario.

Fig. 17. Assignments for the second high-supply sub-scenario.

Fig. 15. Assignments for the medium-supply scenario. Fig. 18. Assignments for the third high-supply sub-scenario.

718
R. Tordecilla-Madera et al.
5. Conclusions
The present investigation involved using a binary programming
model for designing a milk storage and refrigeration logistics system for
a dairy cooperative in the Ubaté region in Colombia's Cundinamarca
department. This design had to include locating cooling tanks which
could store milk from several producers and decisions had to be made
regarding the number of tanks to be placed, each tank's installed
capacity and which producers had to be assigned to each tank to
minimize total cost. A set of clusters was thus created, one for each
tank. A variety of scenarios were considered for the design because real-
life daily milk supply is variable in the target area. The supply was thus
varied in a controlled manner by spanning the various ranges found in
the pertinent literature, resulting in eight configurations which were
individually evaluated for each supply scenario considered for deter-
mining each configuration's robustness and cost. Robustness was
associated with the following parameters: “average distance (km)
traveled by each producer for transporting milk from their property
to a designated cooling tank” and “average weighted distance (km*liter)
covered by each producer when transporting milk from their property
to a designated cooling tank”. It was determined that the best config-
uration in terms of robustness and cost would include eight tanks
located in eight clusters, having an average distance ranging from
0.83 km/producer (high-supply scenario) to 1.35 km/producer (low-
supply scenario). The cost associated with this configuration ranged
from a minimum of 495,176 Col$/day for the low-supply scenarios to a
maximum of 1,142,795 Col$/day for the high-supply ones. Total
installed capacity for this configuration was 12,500 l. A tactical plan
was then developed for tank use in the low-, medium- and high-supply
scenarios; it was thus determined that five out of the eight installed
tanks had to be used for the low-supply scenario, seven out of the eight
had to be used for the medium-supply scenario, and that all the tanks
had to be used in the high-supply scenario.
Regarding putting this tactical plan into effect, the dairy cooperative
has been advised to use forecast models for scientifically and efficiently
establishing the supply scenario (low, medium or high) expected during
each season, thereby enabling optimized usage of installed cooling
tanks.
Academically, this investigation involved using a novel methodology
for solving a real-world strategic location problem. The robust design
arising from it (which can withstand variations in milk supply at a
minimal cost without disturbing normal operations) was offered to the
dairy cooperative in question. The most robust design did not necessa-
rily imply the highest cost; in-depth studies regarding the robustness-
cost relationship must thus be conducted.
It should be noted that, in our model, Euclidean distance was used
for calculating the distance between producers and tanks. This has
provided a good approach because our scope is regional; however,
distance must be calculated more accurately for designs on a larger
scale.
Other sources of uncertainty (in addition to that of supply) should
be included in future research; for example, rural roads can be affected
by rain, thereby preventing the efficient transport of milk. Further
investigation is thus needed regarding the effect of such parameters on
robustness and cost.
Acknowledgments
The authors would like to thank Fundación Universitaria Agraria de
Colombia, Universidad de La Sabana and the unnamed cooperative for
their support without which it would have been impossible to conduct
the present study.
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