Integrated optimization model for distribution network design: a case study of the clothing industry

Distribution network design affects a firm's operating costs and its customer service level. In this paper, we consider distribution network design for improving the closed‐loop logistics in a clothing company. We formulate the problem as a mixed‐integer nonlinear programming model with an objective of minimizing the annual operating costs. Our model simultaneously determines the optimal number of regional distribution centers (RDCs), identifies location and relative size for each RDC, allocates each city distribution center to a specific RDC, decides on supply ratio for each contracted plant, and specifies the annual operating costs and service level for the best scenario, as well as other scenarios. Test results show that this marketing initiative at the studied company can effectively reduce its annual operating costs. Although this paper is a specific case study, it provides several managerial insights and modeling references for similar facility location and allocation problems.