PRODUCTION, TRANSPORTATION, AND DISTRIBUTION PLANNING IN A MULTICOMMODITY TRI-ECHELON SYSTEM

To achieve high productivity in manufacturing plants and warehouses, a n orderly and flexible flow of materials is essential. The interaction between the manufacturing plants and warehouses and issues related to distribution of multiple commodities to customers from warehouses rep resents a crucial step toward an integrated and systematic facilities' design. In this paper we develop a mixed integer programming model fo r the plant and warehouse location problem where the objective is to m inimize the total transportation and distribution costs and the fixed costs for opening and operating plants and warehouses. We employ Lagra ngian relaxation to the model, and also present a heuristic to produce an effective feasible solution. for the problem. This problem has res ulted from a study conducted by the authors for a large company manufa cturing health-care products. The paper reports on the development of a model structure that can be used to predict the performance of the c ompany.