A modified simple heuristic for the p-median problem, with facilities design applications

Facilities design is closely related to efficient use of available resources. This paper presents a heuristic approach to solve two core problems of a good facilities design: facility location and facility layout. The latter group of problems will be solved for warehouse and production systems in particular. All these problems can be formulated as p-median clustering problems. Teitz and Bart (Oper. Res. 16 (1968) 955-961) developed the vertex substitution method to solve those problems. This paper introduces effective improvements on this heuristic. The approach is tested on a large number of randomly generated cases and on problems taken from the literature. The results demonstrate the effectiveness and superiority of our method.