Designing e‐commerce supply chains: a stochastic facility–location approach

Pagès Bernaus, Adela; Ramalhinho-Lourenço, Helena; Juan, Angel A.; Calvet Mir, Laura

doi:http://dx.doi.org/10.1111/itor.12433

Designing e‐commerce supply chains: a stochastic facility–location approach

Citation

Pagès Bernaus A, Ramalhinho H, Juan AA, Calvet L. Designing e-commerce supply chains: a stochastic facility-location approach. Int Trans Oper Res. 2017 July 7;26(2):507-28. DOI: 10.1111/itor.12433

Abstract

E‐Commerce activity has been increasing during recent years, and this trend is expected to continue in the near future. e‐Commerce practices are subject to uncertainty conditions and high variability in customers’ demands. Considering these characteristics, we propose two facility–location models that represent alternative distribution policies in e‐commerce (one based on outsourcing and another based on in‐house distribution). These models take into account stochastic demands as well as more than one regular supplier per customer. Two methodologies are then introduced to solve these stochastic versions of the well‐known capacitated facility–location problem. The first is a two‐stage stochastic‐programming approach that uses an exact solver. However, we show that this approach is not appropriate for tackle large‐scale instances due to the computational effort required. Accordingly, we also introduce a “simheuristic” approach that is able to deal with large‐scale instances in short computing times. An extensive set of benchmark instances contribute to illustrate the efficiency of our approach, as well as its potential utility in modern e‐commerce practices.