The effect of demand representation on locating facilities in a supply chain network

The objectives of a typical facility location problem is either to maximize the coverage with a given number of facilities or to minimize the number of facilities used to cover a given area. In recent years, it has been found that how demand is characterized in a facility location model can significantly affect the performance of facility location models. In a supply chain network the goal is often to maximize the demand coverage and minimize the total costs (construction, transaction, operation, etc.) subject to a set of constraints. In this paper, we explored the importance of demand representation in the context of a supply chain network and examined how a realistic representation of demand in a supply chain network would affect the network design. We first analyzed the general definition and characteristics of the facility location problem in a supply chain. We then examined the various objectives and constraints associated with the demand representation and formulated a multi-objectives model to address the facility location problem in a supply chain network. The overlap function of ArcGIS 9.3 was utilized and a solution procedure to the proposed problem was developed. Finally a numerical example was generated to examine the performance of the proposed model and its solution algorithm.