Designing Production-Inventory-Transportation Systems with Capacitated Cross-Docks

We consider a two-echelon supply chain problem, where the demand of a set of retailers is satisfied from a set of suppliers and shipped through a set of capacitated cross-docks that are to be established. The objective is to determine the number and location of cross-docks and the assignment of retailers to suppliers via cross-docking so that the total cost of pipeline and retailers inventory, transportation, and facility location is minimized. We formulate the problem as a nonlinear mixed integer programming. We first derive several structural results for special cases of the problem. We also demonstrate that the Capacitated Plant Fixed-Charge Transport Location Problem is a special case of our problem. To solve the general problem, we show that it can be written as a cutting stock problem and develop a column generation algorithm to solve it. We investigate the efficiency of the proposed algorithm numerically. We then extend the problem by allowing different truck capacities as decision variables.