Warehouse Network Design With Fortification Considerations: A Mixed-Integer Nonlinear Modeling Approach

This study presents a mathematical model for optimizing warehouse-location decisions in supply-chain network design. Previous studies have focused on the facility-location problem and provided fortification plans and solutions. However, these studies did not consider multi-capacity warehouses. The proposed model identifies optimal warehouse locations, sizes, and branch-warehouse assignments. Additionally, it determines fortification measures to mitigate the risk of warehouse failure. The model is formulated as a mixed-integer nonlinear problem and subsequently linearized using standard techniques combined with a proposed method based on average-probability approximation. A case study of a Canadian company illustrates the model’s efficacy. Sensitivity analysis results demonstrate that when the numbers of fortified and built warehouses are equal, failure probability has no effect on the objective function of the model. Thus, this study presents a comprehensive model that assists businesses in decision-making regarding their warehouse operations, aiming to lower the risk of failure and optimize warehouse infrastructure utilization.