Stochastic facility location with general long-run costs and convex short-run costs

This paper addresses the problem of minimizing the expected cost of locating a number of single product facilities and allocating uncertain customer demand to these facilities. The total costs consist of two components: firstly linear transportation cost of satisfying customer demand and secondly the costs of investing in a facility as well as maintaining and operating it. These facility costs are general and non-linear in shape and could express both changing economies of scale and diseconomies of scale. We formulate the problem as a two-stage stochastic programming model where both demand and short-run costs may be uncertain at the investment time. We use a solution method based on Lagrangean relaxation, and show computational results for a slaughterhouse location case from the Norwegian meat industry. Preprint submitted to Elsevier Science 1 February 2006 

• Type: Journal
• Year: 2008
• Where: COR
• Authors: Peter Schütz, Leen Stougie, Asgeir Tomasgard
• Keywords: COR 2008, Customer Demand, Single Product Facilities, Uncertain Customer Demand