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A GIS-Based Optimization Framework for Competitive Multi-Facility Location-Routing Problem

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Abstract

In a dynamic market setting, firms need to quickly respond to shifting demographics and economic conditions. In this paper, we investigate the problem of determining the optimum set of locations for a firm, which operates a chain of facilities under competition. We consider the objective of maximizing profit, defined as gross profit margin minus logistics costs. We propose a location-routing model where revenue is realized according to probabilistic patronization of customers and routing costs are incurred due to vehicles serving the open facilities from a central depot. We propose a hybrid heuristic optimization methodology for solving this model. The optimal locations are searched for by a Genetic Algorithm while an integrated Tabu Search algorithm is employed for solving the underlying vehicle routing problem. The solution approach is tested on a real dataset of a supermarket chain. The results show that the location decisions made by the proposed methodology lead to increased market share and profit margin, while keeping logistics costs virtually unchanged. Finally, we present a GIS-based framework that can be used to store, analyze and visualize all data as well as model solutions in geographic format.

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Acknowledgements

This research was supported in part by The Scientific and Technological Research Council of Turkey (TÜBITAK) research grant #105K165. We also would like to extend our thanks to Billur Engin and Emre Koç for their contributions to this study.

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Authors and Affiliations

  1. Sabanci University, Istanbul, Turkey

    Burcin Bozkaya & Selim Balcisoy

  2. Faculty of Management, Macka Campus, Istanbul Technical University, Macka, 80680, Istanbul, Turkey

    Seda Yanik

Authors
  1. Burcin Bozkaya
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  2. Seda Yanik
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  3. Selim Balcisoy
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Correspondence to Burcin Bozkaya.

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Bozkaya, B., Yanik, S. & Balcisoy, S. A GIS-Based Optimization Framework for Competitive Multi-Facility Location-Routing Problem. Netw Spat Econ 10, 297–320 (2010). https://doi.org/10.1007/s11067-009-9127-6

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  • DOI: https://doi.org/10.1007/s11067-009-9127-6

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