A Product-to-Plant Allocation Problem in Logistics Network Design

Recently, M&A between companies that produce similar products have been carried out quite often with the intention of improving efficiency and economies of scale. In this paper, a case study is conducted on an M&A model for a Japanese tire company. This model can be formulated as a large-scale mixed integer programming problem. A new formulation and approximate solution method with a tabu search are developed. By using our method, good approximate solutions can be easily obtained within a reasonable computation time using PC. Finally, an analysis using actual case data for the Japanese tire company is carried out and a good product-to-plant allocation is obtained. From our results, it is found that the total cost is improved by 16.85%, the equivalent of $5 million. Our solution is feasible and satisfactory for business managers of the company, and our study can contribute to allocation planning for many other companies.