A hybrid Tabu-SA algorithm for location-inventory model with considering capacity levels and uncertain demands

In this paper, we present a complex distribution network design problem in supply chain system which includes location and inventory decisions. Customers’ demand is generated randomly and each distribution center maintains a certain amount of safety stock in order to achieve a certain service level for the customers it services. Unlike most of past research, our model allows for multiple levels of capacities available to the distribution centers. This consideration helps to achieve the capacity utilization to a high level as our computational results show this fact. We show that this problem can be formulated as a non-linear integer programming model. A hybrid heuristic combining Tabu search with Simulated Annealing (SA) sharing the same tabu list is developed for solving the problem. We comprise the hybrid algorithm with the optimal solution, Simulated Annealing algorithm and Tabu search algorithm. The results indicate that the method is efficient for a wide variety of problem sizes.