ABSTRACT
Logistics network design is concerned with the determination of the number and location of warehouses and production plants, allocation of customer demand points to warehouses, and allocation of warehouses to production plants. The optimal configuration must be able to deliver the products to the customers at the least cost (commonly used as objective) while satisfying the service level requirements. In most logistics network design models, the customer demand is exogenous and defined as a uniform quantity for each product. Such a uniform demand value does not exploit the possibility that different customers have different sensitivity to delivery lead-time. For example in the chemical dye industry, small textile mills tend to be more lead-time sensitive while the bigger textile mills are more price-sensitive, and would be enticed by price discount to accept a longer lead time. Thus, by designing a network to suit different demand classes, the network can be more efficient and network cost can be reduced.
