KEYWORDS: Combinatorial Optimization, Two-echelon Facility Location, Layout Decisions.
ABSTRACT: This paper addresses the design of a two-echelon logistics network. Several products are considered
which are grouped into different families. A finite set of storage areas with different sizes is available for each
family of products. Accordingly, several layouts can be considered in each operating facility. A set of customers
with known demands is given. The decisions to be made regard the selection of the locations where new facilities
should be operating, the type of storage areas to set up, and the transportation of the products from the upper
echelon to the customers via the intermediate facilities. All demand must be satisfied. The goal is to minimize
the total cost which comprises network design and operating costs. For this problem, two mixed-integer linear
programming formulations are proposed as well as several types of additional inequalities aiming at enhancing the
models. Computational experiments performed on randomly generated instances are presented and analyzed.
