A Mixed Integer Programming Approach for Logistic Network Design and Optimization Information and Value Adding Networks

Abstract

As markets, technologies and competitive forces continue to change at ever increasing rates, organisations are becoming more pressing for reform. To compete and survive in these global markets requires a logistic oriented organisation, specifically the need to move goods greater distances quickly and efficiently. Such a radical change entails a regrouping within the organisation so that the key tasks become the management of cross-functional work flows. In this paper, the importance of information sharing has been reviewed and six types of logistic networks have been illustrated. Emphasis has been placed on designing the network on operational considerations such as capacities, geographical locations and core competences as well as market factors and demand. A mixed integer programming method has been used to minimize the logistic network cost and numerical experiments are performed using a brand-and-bound solver from LINDO. The analysis results demonstrate that the proposed mixed integer programming can provide certain combinations of routing rules and locations which result in low logistic costs while maintaining high levels of customer service.