aristotle university of thessaloniki department of economics the role of optimal selection of facilities

233 Pages·2017·5.32 MB·English

ARISTOTLE UNIVERSITY OF THESSALONIKI
DEPARTMENT OF ECONOMICS

MASTER PROGRAM IN
LOGISTICS AND SUPPLY CHAIN MANAGEMENT

THE ROLE OF OPTIMAL SELECTION OF
FACILITIES IN A SUPPLY CHAIN NETWORK
By
Kanellas Konstantinos (R.N: 29)
Supervisor: Diamadidis Alexandros

Master Thesis submitted to the Department of Economics of Aristotle University of Thessaloniki
in partial of fulfillment of the requirements for the degree of Master of Science in Logistics and
Supply Chain Management

Thessaloniki, Greece, September 2018

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Acknowledgements

I would first like to thank my master thesis supervisor professor Mr. Diamadidis
Alexandros of the Department of Economics at Aristotle University of Thessaloniki.
Whenever I had questions or troubles about my research or writing, Mr. Diamadidis
was supporting me. Furthermore, he steered me in the right directions whenever he
thought I needed.

I would also like to thank the owner of Vlachodimos supermarket, Mr. Konstantinos
Vlachodimos who collaborated with me in order to conclude in results in the case study
part of this assignment.

Finally, I must express my gratitude to my parents for providing me support and
continuous encouragement throughout the year of study of this assignment. This
accomplishment would not have been possible without them. Thank you.

Author
Kanellas Konstantinos

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Abstract

The role of optimal selection of facilities in supply chain network

The current assignment investigates the role of facility location positioning in a
supply chain network. The location decisions are very important in the design of that
network because they require high expenses and cannot easily be changed. Particularly,
this assignment focuses on the retail location part of a supply network because in the
case study part the opening of new supermarket store in central Greece is investigated.
In the solution approach of the specific problem, different viewpoints are used. Such
viewpoints encompass simple but effective methods (Weighted Factor Rating Method,
Load Distance technique), a process that can be adjusted to multi-criteria problems
(Analytic Hierarchy Process ) as well as a prototype construction of a gravity model
(Huff model). The methods converge in two choices and it is up to decision maker’s
judgement which approach to follow in order to satisfy its requirements. In conclusion,
the results may propose different choices, but as far as gravity modeling is concerned,
it is worth of future research in order to be improved.

Keywords: facility location problem, retail location, Analytic Hierarchy Process, Huff
model

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Table of Contents

Abstract ..................................................................................................................................... iii
List of Tables ............................................................................................................................ vii
List of Figures ........................................................................................................................... ix
List of Images ............................................................................................................................ xi
Introduction ................................................................................................................................ 1
PART 1: LITERATURE REVIEW............................................................................................ 9
Chapter 1: Research of the facility location problem ................................................................. 9
1.1 Brief history of the major contributions to the facility location theory ............................ 9
1.2 Classification of the facility location models .................................................................13
1.2.1 Francis and White (1974) ........................................................................................13
1.2.2 Brandeau and Chiu (1989).......................................................................................15
1.2.3 Daskin (1995) ..........................................................................................................17
1.2.4 ReVelle, Eiselt and Daskin (2008) ..........................................................................17
1.2.5 Snyder (2010) ..........................................................................................................18
1.2.6 Eiselt and Marianov (2011) .....................................................................................20
1.3 The significant role of distance measurement in location theory ...................................22
1.3.1 Euclidean Distance ..................................................................................................23
1.3.2 Squared Euclidean distance .....................................................................................23
1.3.3 Rectilinear Distance ................................................................................................23
1.3.4 Aisle Distance .........................................................................................................24
1.3.5 Lp Norm Distance ...................................................................................................25
1.3.6 Shortest path ............................................................................................................25
1.3.7 Great Circle .............................................................................................................25
Chapter 2: Basic Facility Location Problems ...........................................................................27
2.1 Minisum Problem on the plane.......................................................................................27
2.2 Minisum Problems on the network.................................................................................29
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2.2.1 P- median problem ..................................................................................................29
2.2.2 Fixed charge facility location problem (UFLP) ......................................................33
2.2.3 Capacitated Facility Location Problem (CFLP) ......................................................37
2.3 Minimax Problem ...........................................................................................................38
2.4 Covering Problems .........................................................................................................41
2.4.1 Set Covering Location Problem (SCLP) .................................................................42
2.4.2 Maximal Covering Location Problem (MCLP).......................................................44
Chapter 3: Other Facility Location Problems ...........................................................................47
3.1 Competitive location problem (CLP) .............................................................................47
3.1.1 Major advances in the competitive location theory .................................................47
3.1.2 Maximum Capture - “Sphere Of Influence” Location Problem (MAXCAP) .........51
3.1.3 Other important concepts ........................................................................................53
3.1.4 Gravity Theory .........................................................................................................54
3.2 Hub Location Problem (HLP) ........................................................................................60
3.3 Undesirable Location Problem (ULP) ............................................................................61
3.4 Location Problem under Uncertainty (LPU) ..................................................................63
3.5 Location Routing Problem (LRP) ..................................................................................64
3.6 Location Inventory Problem (LIP) .................................................................................66
3.7 Generalizations – Extensions of the main concepts .......................................................67
Chapter 4: Solution techniques, methods and algorithms in Facility Location Problem .........69
4.1 Solution approaches in location problems ......................................................................69
4.2 Heuristics ........................................................................................................................70
4.3 Metaheuristics ................................................................................................................71
4.3.1 Genetic Algorithm ...................................................................................................71
4.3.2 Tabu Search .............................................................................................................72
4.3.3 Simulated Annealing ...............................................................................................73
4.4 Exact Methods ................................................................................................................74
4.5 Other Approaches ...........................................................................................................75
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4.5.1 Weighted Factor Rating Method .............................................................................75
4.5.2 Load Distance Technique ........................................................................................76
4.5.3 Center of Gravity .....................................................................................................76
4.5.4 Analytic Hierarchy Process (AHP) .........................................................................77
4.5.5 Geographic Information Systems (GIS) contribution to Location Analysis ...........86
PART 2: CASE STUDY ..........................................................................................................89
Chapter 5: Presentation of Vlachodimos company ..................................................................89
5.1 Vlachodimos supermarket image ...................................................................................89
5.2 Vlachodimos supermarket supply chain .........................................................................91
5.2.1 Vlachodimos Warehouse and Transportation of merchandise ................................91
5.2.2 Vlachodimos Supermarket Store .............................................................................93
Chapter 6: Implementation of models and techniques .............................................................95
6.1 Weighted Factor Rating Method and Facility Location Problem (FLP) ........................95
6.2 Load Distance Technique and Facility Location Problem (FLP) ...................................96
6.3 Analytic Hierarchy Process (AHP) and Facility Location Problem (FLP) ....................99
6.4 Huff model and Facility Location Problem (FLP) .......................................................107
Chapter 7: Results and Future Reasearch ...............................................................................125
Conclusion ..............................................................................................................................131
References ..............................................................................................................................133
APPENDICES ........................................................................................................................145
A) AHP ...............................................................................................................................145
B) Huff Model ....................................................................................................................155

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List of Tables

Table 1.1: Classification criteria..........................................................................17
Table 4.1: Comparison scale for the importance of factors..................................80
Table 6.1: Values of factors for the candidate locations.......................................96
Table 6.2: Total weight scores for the candidate locations...................................96
Table 6.3: Coordinates of candidate locations.....................................................98
Table 6.4: Estimated annual pallets.....................................................................98
Table 6.5: Calculated distances between candidate locations and warehouse......98
Table 6.6: Load-Distance resulted values............................................................98
Table 6.7: Abbreviations of the used factors......................................................101
Table 6.8: Prioritization of factors.....................................................................102
Table 6.9: Consistency Ratio (CR) result...........................................................103
Table 6.10: MPUR prioritization on the candidate locations.............................103
Table 6.11: EOFA prioritization on the candidate locations..............................103
Table 6.12: ATTC prioritization on the candidate locations..............................104
Table 6.13: ARPS prioritization on the candidate locations...............................104
Table 6.14: ASOH prioritization on the candidate locations..............................104
Table 6.15: PURP prioritization on the candidate locations...............................104
Table 6.16: INUN prioritization on the candidate locations...............................104
Table 6.17: COBE prioritization on the candidate locations..............................105
Table 6.18: COMN prioritization on the candidate locations.............................105
Table 6.19 : Consistency Ratio (CR’) result of MPUR......................................105
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Table 6.20 : Consistency Ratio (CR’’) result of EOFA......................................105
Table 6.21 : Consistency Ratio (CR’’’) result of ATTC....................................106
Table 6.22: Overall priority ranking for the candidate locations........................106
Table 6.23: Scenarios of different size of stores.................................................108
Table 6.24: Customers’ patronage possibility and Expected Consumers in
Trikala...............................................................................................................120
Table 6.25: Customers’ patronage possibility and Expected Consumers in
Karditsa.............................................................................................................121
Table 6.26: Customers’ patronage possibility and Expected Consumers in
Kalabaka...........................................................................................................121
Table 6.27: Customers’ patronage possibility and Expected Consumers in
Trikala...............................................................................................................122
Table 6.28: Customers’ patronage possibility and Expected Consumers in
Karditsa.............................................................................................................122
Table 6.29: Customers’ patronage possibility and Expected Consumers in
Kalabaka ...........................................................................................................122
Table 6.30: Overall final results.........................................................................125

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List of Figures

Figure A: Supply Chain Network..........................................................................2
Figure 1.1: Classification of facility location models..........................................15
Figure 1.2: Presentation of a continuous model structure....................................19
Figure 1.3: Presentation of a network model structure.........................................19
Figure 1.4: Presentation of a discrete model structure.........................................20
Figure 1.5: Depiction of Minisum problem.........................................................20
Figure 1.6: Depiction of Minimax problem.........................................................21
Figure 1.7: Depiction of Covering problem.........................................................22
Figure 1.8: Depiction of Euclidean distance........................................................23
Figure 1.9: Depiction of Rectilinear distance.......................................................24
Figure 1.10: Depiction of Aisle distance in plant layout......................................24
Figure 1.11: Depiction of Great Circle.................................................................26
Figure 3.1: (a) demand nodes (red circles) are assigned to one hub (blue squares),
(b) demand points are assigned to more than one hub..........................................61
Figure 4.1: Flow chart of general Tabu Search process........................................73
Figure 4.2: General graphical representation of an AHP structure.......................79
Figure 4.3: Pairwise comparisons of the selected factors example.......................80
Figure 4.4: Pairwise Comparison Matrix example...............................................81
Figure 4.5: Weighted Sum Vector.......................................................................82
Figure 4.6: Pairwise comparison matrix of each qualitative factor (example factor
1) for each alternative..........................................................................................83
Figure 4.7: Example of a matrix with overall depicted priorities.........................84
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Figure 4.8: AHP steps in the solution process of FLP..........................................85
Figure 4.9: Distinctive representation of GIS layers............................................87
Figure 6.1: Graphical representation of AHP-FLP............................................102
Figure 6.2: Diagrammatic representation of Expected Consumers in Walk Time
approach............................................................................................................121
Figure 6.3: Diagrammatic representation of Expected Consumers in Drive Time
approach............................................................................................................123

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