A network design problem with location, inventory and routing decisions

Abstract

We consider the design of a supply chain network for a blood bank system to satisfy the needs of hospitals in a certain region, by integrating strategic, tactical and operational decisions. In the current blood distribution network, hospitals keep their own inventory and procure bloods from a main blood bank. We propose an alternative model, in which, some of the hospitals are selected as local blood banks (LBBs) and serve the hospitals that are assigned to them. Thus, we try to solve a complex problem which aims to find optimal number and locations of LBBs, assignment of hospitals to opened LBBs and the weekly and daily routes between the facilities. We formulate a mixed integer nonlinear programming model to combine these decisions to minimize total system cost and propose a simulated annealing heuristic approach to find near optimal solutions. We analyze the performance of the heuristic via detailed numerical studies.