FACILITY LOCATION AND ALLOCATION IN A SUPPLY CHAIN NETWORK OF A MANUFACTURING FIRM

Abstract

This study is aimed at minimizing total cost in the supply chain network. The objectives involved optimal facility location and allocation decision as well as measuring the impact of disruption in change in supplier prices and transportation cost. This was achieved by the use of a single objective, multi-period, deterministic and centralized supply chain model, whereby products were allocated optimally across the Warehouses and DC’s in the supply chain network and the facilities were located in such a way as to minimize the total cost involved in running the supply chain. The methodology used was the Mixed Integer Linear Programming (MILP) modelling approach to formulate the supply chain problem to determine the optimal facility location and product allocation in the supply chain network. The findings showed that the total cost is effectively reduced with the adoption of the scientific method of linear programming instead of the analytical and the rule of the thumb methods. Findings also showed that the increase a supplier’s price and cease in a transportation type had minimal impact on the total cost. Also, a renewed optimized setting was achieved with the addition of extra facilities in several locations into the supply chain network which further reduced the total cost by 63.6% from N 8,006, 901, 000 to N 2, 914, 400,000. In conclusion, the whole idea behind this research is to provide a universal platform for the decision makers running a firm to take and implement their managerial decisions. The feasibility can be achieved by incorporating the framework into the company’s infrastructure. It is recommended that cost optimization problems in a supply chain must be solved with appropriate scientific approaches by managers to achieve high efficiency in facility location and allocation decisions. Proper and adequate training of supply chain managers in the use of these scientific methods for planning and implementation is also recommended.