A Lagrangian Heuristic Algorithm for an Automobile Distribution Network Optimization Problem

The distribution network design problem for an automobile company in China is investigated. Through optimizing the location of the distribution centers and allocation of retailers to distribution centers or plants, the total profit for the automobile company is maximized. The demand is assumed to be sensitive to the lead time and a Linear Integer Programming model is proposed to formulate the problem. A Lagrangian heuristic algorithm is developed to solve the problem, in which the subgradient algorithm and a heuristic algorithm is combined. Large scale examples including up to 20 plants, 100 distribution centers and 500 retailers are used to test the algorithm. Computational results show that the solution approach can obtain near-optimal solution for the problem in short time.