Optimization of Urban Distribution Centres: A Multi-Stage Dynamic Location Approach

Abstract

Customer demand is dynamic and changeable; thus, optimality of the enterprise’s initial location cannot be guaranteed throughout the planning period in order to minimize site selection cost and maximize service reliability in the whole operation cycle. The enterprise planning period is divided into different stages, and a static location model is established at the fixed stage. In addition, a multi-stage dynamic location model is established by introducing the transfer cost between adjacent stages. To reduce the difficulty of solving the dynamic location model, first, we determined the optimal site selection and allocation strategy for each stage. Second, we designed a novel method that transforms the multi-stage dynamic location problem into the shortest path problem in graph theory. Finally, the Dijkstra algorithm was used to find the optimal dynamic location sequence so that its cumulative cost was the lowest in the whole planning period. Through a case study in China, we compare the costs of static and dynamic locations and the location cost under different objectives. The results show that this dynamic location generates more income (as it reduces cost) in comparison to the previous static location, and different location objectives have a substantial influence on location results. At the same time, the findings indicate that exploring the problem of enterprise location from a dynamic perspective could help reduce the operating cost and resources from a sustainable development perspective.