A model and methodologies for the location problem with logistical components

This paper significantly extends traditional facility location models by introducing several logistical cost components such as holding, ordering, and transportation costs in a multi-commodity, multi-location framework. Since location and logistical costs are highly inter-related, the paper provides an integrated model, and seeks to minimize total physical distribution costs by simultaneously determining optimal locations, flows, shipment compositions, and shipment cycle times. Two sophisticated heuristic methodologies, based on Lagrangian relaxation and simulated annealing, respectively, are provided and compared in an extensive computational experiment.