An approximation algorithm for a facility location problem with stochastic demands and inventories

In this article we propose, for any > 0, a 2(1 + )-approximation algorithm for a facility location problem with stochastic demands. This problem can be described as follows. There are a number of locations, where facilities may be opened and a number of demand points, where requests for items arise at random. The requests are sent to open facilities. At the open facilities, inventory is kept such that arriving requests find a zero inventory with (at most) some pre-specified probability. After constant times, the inventory is replenished to a fixed order up to level. The time interval between consecutive replenishments is called a reorder period. The problem is where to locate the facilities and how to assign the demand points to facilities at minimal cost per reorder period such that the above mentioned quality of service is insured. The incurred costs are the expected transportation costs from the demand points to the facilities, the operating costs (opening costs) of the facilities and the investment in inventory (inventory costs).