A mixed integer programming and heuristic algorithm for a warehouses location problem

A warehouses location problem is treated using a mixed integer programming and a heuristic algorithm. A simplification of freight rates schedules, based upon shipments consolidation and a linear regression of rates vs distances was made. Warehousing costs were divided according to fixed and variable and related to the throughput of the warehouses. Consideration was given in the analysis to the choice between owning and leasing each warehouse. In the case studied, the analysis demonstrated that a possible saving of approximately 22 per cent in annual distribution costs could be realized under the optimized warehouse location network.