Date of Award

12-2005

Degree Name

Doctor of Philosophy

Department

Industrial and Manufacturing Engineering

First Advisor

Dr. Abdolazim Houshyar

Second Advisor

Dr. Bob White

Third Advisor

Dr. Steven Butt

Fourth Advisor

Dr. Damodar Golhar

Abstract

This study developed a quantitative model that solves a facility locationallocation (LA) problem that maximizes the net profits generated from expected sales. The model was formulated to take into consideration demand uncertainty, sensitive prices, and existence of inventory for capacitated and uncapacitated facilities. Four new models for the LA problem with stochastic demands and inventory were developed and studied. The four models were combinations of capacitated and uncapacitated facilities and sensitive and insensitive prices.

A new method was proposed for achieving optimality, and an approximation procedure was developed that could find near-optimal solutions for problems that could not be solved optimally. Additionally, an existing Two-Phase Method was modified to solve this problem, and a heuristic algorithm was developed to improve the solution of the modified Two-Phase Method for capacitated facilities.

Inventory plays a critical role in either maximizing profit or minimizing cost, and it also has an impact on shipping arrangements. However, to the author’s best knowledge, the effect of inventory on profit-maximization LA problems has never been investigated in the literature. Therefore, one of the objectives of the proposed research was to study the effect of inventory on a profit-maximization LA problem. Inventory impact was found to be significant, which significantly changed the expected profit level and shipping arrangements.

All methods were capable of optimizing small LA problems with uncapacitated facilities. The proposed optimization method was shown to have the ability of solving small LA problems with capacitated facilities as well. However, for large problems the Approximation Method was the only technique capable of solving the uncapacitated facilities’ problems. Furthermore, the Approximation Method always had the best available solution for capacitated facilities with large problems.

Hence, the study proposed a way to optimally maximize expected profit by locating a number of new facilities that serve a specific set of customers with uncertain demands, sensitive prices, and an existence of inventory. Also, the study provided an efficient method capable of solving very large LA problems.

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Dissertation-Open Access

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