Integrating inventory impacts into a fixed-charge model for locating distribution centers

An important question in the design of efficient logistics systems is the identficaton of locations for distribution centers. Optimal designs should be based on consideration of inventory, transportation, construction and operating costs. This paper describes a method for including inventory costs within a fixed-charge facility location model, allowing such a model to be used more effectively for the development of optimal system designs. A realistic application of the model is discussed.