Stochastic single-source capacitated facility location model with service level requirements

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)439-451
Journal / PublicationInternational Journal of Production Economics
Issue number2
Publication statusPublished - Feb 2009


A stochastic version of single-source capacitated facility location problem is considered. A set of capacitated facilities is to be selected to provide service to demand points with stochastic demand at the minimal total cost. The facilities have service level requirements modeled by chance constraints. For Poisson demand, the problem is proved equivalent to a known solvable deterministic problem. For Normally distributed demand, it is equivalent to a deterministic mixed integer non-linear programming problem. A hybrid heuristic of Lagrangean relaxation with a single-customer-multi-exchange heuristic is embedded within a branch-and-bound framework to find upper and lower bounds for this problem. From test instances created from benchmark problems (10-20 facilities and 50 demand nodes) and real-life data on the deterministic problem, the gap between the bounds is within 6.5% with an average of 2.5%. © 2008 Elsevier B.V. All rights reserved.

Research Area(s)

  • Chance constrained programming, Lagrangean relaxation, Multi-exchange heuristic, Service level, Stochastic facility location problem