Integrated Modeling for Location Analysis

Delivery of products and services relies on well-managed operations. In designing large-scaled supply chain and service systems, locations of key facilities are a critical decision, as these facilities form the backbone of operations of these systems. For example, a key to effective supply chain management is the deployment of a structurally well-designed facility network, consisting of plants, warehouses, retail stores, etc. The aim of the study of facility location is to develop analytical methodologies to inform the planning decisions for evaluating and selecting siting plans for these facilities that ensure both convenient provision of (or access to) products and services by customers and users, as well as efficient operations (i.e., low operating costs).

Facility location and network design has long been an integral topic of study in operations management. In this literature, one may observe that earlier works mainly focused on a strategic view of accessibility and operational costs, using performance metrics based on strategic distances between the chosen facilities and customers or suppliers. This traditional approach often neglects the impacts of future tactical and operational activities to be conducted in the network, and optimizes objectives that do not fully reflect the long-term performance of the facility network. In attempt to rectify this shortcoming, researchers have proposed an integrated modeling approach that enhances the classical models by jointly considering strategic, tactical and operational activities in facility systems. By integrating tactical and operational characteristics of facility networks into strategic design decisions, the integrated approach offers a more balanced perspective on the strategic trade-offs in network design.

As shown in a series of recent research, this integrated modeling approach can potentially deliver new insights into facility location problems in a variety of contexts, e.g., supply chain network design, deployment of health care facilities, and design of storage systems for renewable power. In this monograph, we perform a review of some important concepts in this emerging stream of literature. Motivated by supply chain design applications, we first discuss the basic modeling concepts, including both mathematical programming-based and analytical approaches for modeling. While simulation-optimization approaches can be used for analyzing location problems, they are not covered in the scope of this monograph. We also review techniques adopted in the literature to analyze and solve these classes of location models. This is aimed to serve as a reference for readers (especially students) who like to develop their own models but are less familiar with this line of research. Furthermore, we review a number of applications of this line of research, covering both applications in supply chain contexts and other emerging domains, such as sustainable transportation, energy and health care.