Distribution Center Location
FACILITY LOCATION PROBLEM
Strategic distribution center placement reduces agricultural transport costs by 15–30% and post-harvest losses by 10–20%. In developing countries, 30–40% of fresh produce is lost between farm and market due to inadequate cold chain logistics (Parfitt et al., 2010). Every season, cooperatives must decide which potential hub locations to open—balancing facility costs against transport distances to dozens of farming regions. This is the Uncapacitated Facility Location Problem (UFLP)—one of the foundational NP-hard problems in combinatorial optimization.
Where This Decision Fits
Post-harvest operations chain — the highlighted step is what this page optimizes
The Problem
From distribution centers to optimization theory
An agricultural cooperative considers 5 potential distribution centers to serve 10 farming regions. Opening a center has a fixed cost; each region must be served by one center, incurring a transport cost. The goal is to minimize total fixed + transport cost.
This is the Uncapacitated Facility Location Problem (UFLP): select facilities to open and assign customers to minimize total cost. NP-hard.
| Agriculture Domain | UFLP Model | |
|---|---|---|
| Distribution center | Facility (fixed cost fi) | |
| Farming region | Customer | |
| Transport cost | Assignment cost cij | |
| Minimize total cost | min Σfiyi + Σcijxij |
Try It Yourself
Design your own distribution network — edit centers and regions, then solve
Configuration
5 Centers · 10 Regions| Name | X | Y | Fixed Cost ($K) |
|---|
| Name | X | Y |
|---|
The Algorithm
Greedy Add for Facility Location
Start with No Facilities
All facilities are closed initially. Total cost is infinite (customers unserved).
Evaluate Each Candidate
For each closed facility, compute the total cost if it were opened (fixed cost + transport from all customers to nearest open facility).
Open Best Facility
Open the facility that gives the greatest cost reduction. Add its fixed cost to the total.
Repeat Until No Improvement
Continue opening facilities until no additional opening reduces total cost.
Real-World Complexity
Factors beyond the basic facility location model
Seasonal Roads
Some routes are impassable during spring thaw or winter, changing transport costs.
Capacity Limits
Real centers have throughput limits, making capacitated models more realistic.
Demand Growth
Regional production changes over years; locations must serve future demand.
Community Impact
Center locations affect local employment and community development.
Environmental Rules
Zoning and environmental regulations restrict where facilities can be built.
Multi-Modal Transport
Rail, road, and river transport options create different cost structures.
References
Key literature on facility location