Supply Chain Network Design Considering Customer Service Level

The supply chain network consists of suppliers, warehouses, distribution centers, and retail outlets which provide the flow of material and products. Determining the location of the facilities and warehouses, determining the appropriate number of warehouses, determining which products will be received by which customers and determining the size of each warehouse are strategic decisions. Due the high competition in businesses, corporations have to enhance their service level to be able to respond their customers’ needs and wants quickly and effectively. For this reason, the aim of the study is to make warehouses open in appropriate locations at high, medium and low service level by minimizing operation, transportation, inventory holding and distribution costs. In this paper, we have developed an analysis procedure for the location of DCs that integrates facility costs, inventory costs, transportation cost and service responsiveness consider a multi-echelon service parts logistics system with multi products and number of warehouses via set covering model. This model, which tackled a supply chain composed of the three stages on the brink of suppliers, facilities, warehouses and customers, includes a mathematical structure with multi products and mixed integer programming. Cplex 12.2 solver of GAMS 23.5. program is used in this study. As a result, production facilities opens in Eskisehir, Istanbul, Kayseri and Erzurum cities, and 17, 10 and 6 warehouses runs at high, medium and low service level respectively. There will be a tradeoff between inventory and transportation costs. If we want to force the opening of warehouse in some cities, we will see total and incurred costs.