A Mathematical Model for Optimizing Postal Supply Chain Networks and Facility Location

Abstract

Citation: H. Fazlollahtabar, "A mathematical model for optimizing postal supply chain networks and facility location," Abstract: The strategic positioning of distribution, sales, and service facilities plays a critical role in ensuring the efficiency, reliability, and cost-effectiveness of supply chains. In particular, the location of such facilities within the transshipment network significantly influences both operational costs and consumer satisfaction by affecting delivery times and service quality. This study introduces a mixed-integer linear programming (MILP) model designed to optimize the layout of a postal supply chain network. The model aims to minimize the key cost components, including transportation, facility location, and holding costs, within a four-echelon supply chain consisting of suppliers, warehouses, retailers, and recipients. Parcels are initially collected by suppliers and delivered to regional warehouses, which then allocate them to selected retail locations. The selection of optimal retail locations is based on a cost minimization criterion, after which parcels are transported to the final delivery points-post offices situated in various cities. A distinctive feature of the proposed model is the assumption that demand at the recipient level is determined at the supplier level, thereby facilitating more centralized demand management and reducing uncertainties in the planning process. The model incorporates several constraints, such as flow balance, capacity limitations, and retailer selection. The optimization problem is solved using LINGO 16 software, and a comprehensive analysis is conducted to identify the optimal configuration of retailer locations and parcel flow distribution. A numerical example is provided to demonstrate the practical application of the model, and sensitivity analysis is performed to assess the impact of key parameters-such as retailer capacity and initial inventory levels-on the overall cost. The results indicate that increasing retailer capacity leads to a reduction in total supply chain costs, highlighting the benefits of economies of scale and parcel consolidation. However, an increase in the initial quantity of parcels results in higher costs due to elevated transportation and holding expenses. These findings offer valuable insights for decision-makers seeking to optimize postal supply chains, balancing the need for cost efficiency with the provision of high-quality service.