Lower and upper bounds for a capacitated plant location problem with multicommodity flow

In this paper, we introduce a capacitated plant location problem with multicommodity flow. Given a set of potential plant sites and a set of capacitated arcs linking plants, transshipment points and customers, the aim is to determine where to locate plants and how to move flows from open plants to customers through a set of transshipment points. This model extends the classical capacitated plant location problem by introducing a multicommodity flow problem in the distribution issue. The combination of the location problem and the flow distribution problem is reasonable and realistic since both of them belong to strategic planning horizons. We propose a Lagrangean-based method, including a Lagrangean relaxation, a Lagrangean heuristic and a subgradient optimization, to provide lower and upper bounds of the model. Then, we employ a Tabu search to further improve upper bounds provided by the Lagrangean procedure. The computational results demonstrate that our solution method is effective since gaps between the upper and lower bound are on average around 2%.