Facility Location for a Closed-Loop Distribution Network: a Hybrid Approach

Purpose - The aim of the study is to find a sustainable facility location solution for a closed loop distribution network in the uncertain environment created by of high levels of product returns from online retailing coupled with growing pressure to reduce carbon emissions.
Design/methodology/approach - A case study approach attempts to optimize the distribution centre location decision for single and double hub scenarios. A hybrid approach combining centre of gravity and mixed integer programming is established for the un-capacitated multiple allocation facility location problem. Empirical data from a major national UK retail distributor network is used to validate the model.
Findings - The paper develops a contemporary model that can take into account multiple factors (e.g. operational and transportation costs and supply chain risks) while improving performance on environmental sustainability.
Practical implications - Based on varying product return rates, Supply Chain Managers can decide whether to choose a single or a double hub solution to meet their needs. The study recommends a two hub facility location approach to mitigate emergent supply chain risks and disruptions.
Originality/value - A two-stage hybrid approach outlines a unique technique to generate candidate locations under 21st century conditions for new distribution centers.