A facility location problem with inventory-level-dependent hazard zones

2018 Institute of Industrial Engineers (IIE). All rights reserved. We consider a variant of the facility location problem that requires determining the locations of two types of facilities, namely, administrative and inventory stock locations. Each stock location contains hazardous or obnoxious materials, which creates an inventory-level-dependent hazard zone, within which no administrative facilities may be located. Thus, increasing the inventory level at a stock location increases the radius around it in which administrative offices are forbidden. Such problems arise, for example, on military bases or in the production of hazardous materials. We seek a set of administrative and stock locations in order to accommodate required amounts of warehouse storage and office space at a minimum total transportation plus administrative floor space cost. This results in a large-scale combinatorial optimization problem. Using Lagrangian relaxation in combination with a heuristic solution technique, we derive lower and upper bounds on the optimal solution value. We also propose a set of valid inequalities that enables reducing the average optimality gap for a large set of test problems to within two percent.

A facility location problem with inventory-level-dependent hazard zones Conference Paper