A Regression-Based Approach for Central Warehouse Location Problem

In continuous review inventory model, (${\varrho}$, ${\gamma}$) system, order quantity(${\varrho}$) and reorder point(${\gamma}$) should be determined to calculate inventory-related cost that consists of setup, holding, and penalty costs. The procedure to obtain the exact value of ${\varrho}$ and ${\gamma}$ is complex. In this paper, a regression analysis is proposed to get the approximate inventory-related cost without the determination of ${\varrho}$ and ${\gamma}$ in the case that the standard deviation(${\sigma}$) of the lead time demand is small or that the mean(${\mu}$) of the lead time demand is proportional to ${\sigma}$. To save inventory-related cost, central warehouses with (${\varrho}$, ${\gamma}$) system can be built. Central warehouse can provide some stores with products with the consideration of the tradeoff between inventory-related cost and transportation cost. The number and the location of central warehouses to cover all the stores are determined by a regression-based approach. The performance of the proposed approach is tested by using some computational experiments.

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