A warehouse location-routing problem

The interdependence between distribution center location and vehicle routing has been recognized by both academics and practitioners. However, only few attempts have been made to incorporate routing in location analysis. This paper defines the Warehouse Location-Routing Problem (WLRP) as one of simultaneously solving the DC location and vehicle routing problems. We present a mixed integer programming formulation of the WLRP. Based on this formulation, it can be seen that the WLRP is a generalization of well-known and difficult location and routing problems, such as the Location-Allocation Problem and the Multi-depot Vehicle Dispatch Problem. It is therefore a large and complex problem which cannot be solved using existing mixed-integer programming techniques. We present a heuristic solution method for the WLRP, based on decomposing the problem into three subproblems. The proposed method solves the subproblems in a sequential manner while accounting for the dependence between them. We discuss a large-scale application of the proposed method to a national distribution company at a regional level.