Strategic Decision Support System using Heuristic Algorithm for Practical Outlet Zones Allocation to Dealers in a Beer Supply Distribution Network

We consider a two-echelon beer supply distribution network with the brewer replenishing the dealers and the dealers serving the outlet zones directly, for multiple product types. The allocation of the outlet zones to the dealers will determine the quantity of products the brewer replenishes each dealer, which will in turn impact the total warehousing and transportation costs. The mixed integer optimization model formulated is difficult to solve and the model itself does not include practical business considerations in the distribution business. A heuristics algorithm is designed and easily implemented using spreadsheets with Visual Basic programming to effectively and efficiently allocate the outlet zones to the dealers. The spreadsheets model serves as a strategic decision support system that allows the user to play with “What-if” scenarios by flexibly setting the decision to open or close a dealer and assigning outlet zones to several potential dealers, taking into account the practical business considerations. The algorithm will determine the best allocation of the outlet zones, among the potential dealers, to achieve minimum total network costs. With several “What-if” scenarios and their corresponding allocation results, the user can make the strategic decision to select the most suitable scenario.