Redesigning and Re-planning of Location, Pricing, Inventory and Marketing Decisions in a Multi-channel Distribution Network: A Case Study

Abstract

Discussion of distribution and distribution network design and planning, including location, pricing, optimal selection of distribution channels, as well as marketing decisions, is of great importance in the supply chain. Due to the changes and uncertainty of market demand, the design and planning of the distribution network and static sale have encountered many problems in practice. This article presents a nonlinear mathematical programming model for locating, inventory control, and marketing of manufactured products for a multi-activity organization that includes manufacturing, distribution, retail, and wholesale units. The model includes the localization of distribution centers and the corresponding inventory management, taking into account marketing-related parameters such as multi-channel pricing. A centralized decision support is developed to select the appropriate sales channel, to determine the quantity of products sold in each channel and the discounts granted for each specific channel using real data. In this model, the goal is to maximize profit while increasing customer value by considering competitors' price and choosing the best channel to deliver the product to the customer. Finally, for a small problem instance, the proposed model was solved using the GAMS 28.2.0 x64 optimization software package. Validation study and sensitivity analysis are performed to imply the effectiveness of the formulated mathematical model.