Integrating location and logistics models

Economic geographers investigate facility location problems by applying procedures derived from the classical location theory. These conventional procedures focus on the analysis of the tradeoffs between facility and transportation decisions, and provide solutions to location problems that minimize distance-based cost components. The classical approach leads to basic shortcomings when applied to physical distribution problems. Furthermore, the GIS industry shows little attention to physical distribution problems and the manipulation of logistics data is difficult in out-of-box GIS products. Logistics decision-makers attempt to optimize their distribution systems by performing the tradeoff analysis among facility, inventory and transportation decisions. In addition, the minimization of distribution costs is generally performed analyzing time-sensitive costs only. This study aims to improve the contribution of geographic methodologies to distribution problems by analyzing inventory and transportation decisions, and then integrating time-sensitive cost components with distance-based system costs. An implemented formulation of the p-median problem is developed for this purpose in this study. A heuristic algorithm based on the swapping location criterion is used for the achievement of the solution of the physical distribution problem. Conventional swapping algorithms consider the best feasible solution by analyzing the spatial configuration of facilities. In this study, the implemented heuristic algorithm analyzes both savings obtained applying a change in the spatial configuration of the facilities and in the average speed of the transportation provider. This formulation is embedded as an extension available for the package ArcView 3.2 by ESRI. The logistics extension also includes a customized GUI for the input, editing, analysis, and output of logistics data. The major outcome from this study is that average speed of service and value of shipped item play a key role in the determination of the total distribution costs. The minimization of these costs, from a shipper's perspective, suggests number and location of warehouses that optimize the physical distribution system.