Facility location design methodology of global supply network (A proposal of facility location design method considering inventory amount)

Abstract

For a manufacturing industry with rapid globalization, it is important to design an appropriate supply network strategy. Our study made an attempt to apply mathematical optimization techniques in supply network strategy design. At strategy design stage, facility locations are optimized with a large variety of constraints and objectives. However at this stage, details for more precise evaluation such as product models and delivery routes are not yet determined. To perform such optimization, this research uses a simplified one-echelon network of Manufacturing - Transport - Market for modeling. We built a supply network model to optimize facility location based on costs, inventory amounts, and facility capacities of manufacturing sites. Furthermore, by using safety stock to cover the risk of inventory build-up due to fluctuating demands, we also enable our facility location design to accommodate variable demand risks. This paper explains in details the proposed supply network model and the numerical experiment results of global facility locations calculation in such case.