Lower and upper bounds for a two-stage capacitated facility location problem with handling costs

We study in this paper multi-product facility location problem in a two-stage supply chain in which plants have production limitation, potential depots have limited storage capacity and customer demands must be satisfied by plants via depots. In the paper, handling cost for batch process in depots is considered in a realistic way by a set of capacitated handling modules. Each module can be regards as alliance of equipment and manpower. The problem is to locate depots, choose appropriate handling modules and to determine the product flows from the plants, opened depots to customers with the objective to minimize total location, handling and transportation costs. For the problem, we developed a hybrid method. The initial lower and upper bounds are provided by applying a Lagrangean based on local search heuristic. Then a weighted Dantzig–Wolfe decomposition and path-relinking combined method are proposed to improve obtained bounds. Numerical experiments on 350 randomly generated instances demonstrate our method can provide high quality solution with gaps below 2%.