Solution method for delivery center location problem considering inventory cost and profit ratio

Facility location and allocation decision problem LAPs (Location-Allocation Problems) aiming to minimize total expenses, such as transportation expenses, have been considered in conventional supply chain networks. Facility location and inventory decision problem PM-LIPs (Profit-Maximization Location-Inventory Problems), which aim to maximize profits, are also being studied. This study considers a case in which a customer's demand is sensitive to the price of the commodity, and presents the PM-LIPs of the distribution center, which considers inventory cost and profit ratio. It also verifies the efficiency of the solution through numerical experiments. In this paper the new efficient solution algorithm based on piecewise linear approximation is developed.