A profitability and area coverage optimization model for a three-level distribution network

• Main Authors: Gamboa, Jose Luis P., Nocom, Jerome Anthony C., Tee, Justin Wendell D.
• Format: text
• Language: English
• Published: Animo Repository 2009
• Subjects: Business planning > Mathematical models; Planning > Mathematical models; Mathematical optimization; System design; Industrial Engineering
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/6475
• Institution: De La Salle University

In most studies, distributors have been given less attention as compared to what is given to the host company. This study aims to develop an optimization model for the profitability of both the distributor center and the distributor while taking into account the maximum area coverage (retailers served) and distributor allocation in a multi-level distribution network. In order to address this problem, a mixed integer nonlinear programming model was formulated with a multi-objective function. The first objective function maximizes the profit of both the distributor center and distributor while the second objective function maximizes the area coverage of the network. The model was translated into the General Algebraic Mathematical Model System language. The model was able to capture the logical and expected behavior, and was able to make decisions that maximized the profit of the major stakeholders in the network while maximize the area coverage. General equations were formulated, by a scaled down model of four distributor center warehouses and distributors and six retailers was used to validate the model reaction. Through the use of Design of Experiments, the significant factors affecting the model were determined. The analyses of the significant factors were evaluated using the Response Surface Methodology. Parameter combinations from the handling cost, retailer demand, and operational capacity of the distributors showed that increasing area coverage (number of retailers served) does not always translate to higher profit.