A bi-objective stochastic optimization model for reliable warehouse network redesign

• We propose a bi-objective two-stage stochastic mixed-integer linear programming.
• The importance of considering reliability concepts is considered and modeled.
• Two type of delivery lead times has taken into account under reliability.
• An industrial case study is used to show the applicability of the proposed optimization model.
• In order to obtain Pareto optimal solutions, a novel version of εε-constraint method is applied.

This paper proposes a developed bi-objective two-stage stochastic mixed-integer linear programming model for redesigning a reliable warehouse network. In this model, the warehouses capacity which should be phased out, remained, or relocated to other warehouses, and the shipment quantity of the product between the network nodes with a consideration for two delivery lead times is to be determined. Unlike most previous works, considering two delivery lead times, the maximum capacity for each warehouse location, reliability and uncertainty are taken into account in this study. The proposed bi-objective model includes: (1) minimizing average costs including the sum of fixed, production, transportation, relocation and capacity extension costs; (2) maximizing the coverage percentage of customer demand delivered within the preferred delivery lead time. In order to obtain Pareto optimal solutions, a novel version of εε-constraint method (i.e., the augmented εε-constraint) is applied. A real industrial case is applied to validate and verify the developed warehouse redesigning network model under reliability concept.