2016 IEEE International Conference on e-Business Engineering
Multi-facilities Location and Allocation Problem of Three-echelon Supply Chain
Based on an Improved Genetic Algorithm
Zhishuo Liu ,Han Li, Pengfei Gao
School of Traffic and Transportation
Beijing Jiaotong University
Beijing, China
e-mail: zhsliu@bjtu.edu.cn; 14120778@bjtu.edu.cn; 14120585@bjtu.edu.cn.
Abstract—A new mathematics model on multi-facilities
location and allocation problem(MLAP) of three-echelon
supply chain was built, which mainly took some logistics cost
such as inventory cost, carrying cost, transportation cost into
consideration. Then, an improved Genetic Algorithm was
proposed to solve the MLAP. In this algorithm, the real
encoding method was used to encode the solution directly, and
meanwhile the crossover and mutation operator were
improved. Finally, a numerical experiment showed clearly the
feasibility of the IGA method and the effectiveness of the model.
Keyword-Three-echelon Supply Chain; Location and
Allocation Problem; Multi-facilities ;Genetic Algorithm;
I. INTRODUCTION
Supply chain integration is a kind of management
method with a high level of cooperation among supply chain
partners. Its aim is to distribute the information generated in
the process of integration, such as the products and service,
information flow, capital flow and other information. Design
a reasonable supply chain network based on location-
distribution method is one of the most effective ways to
solve the above objective.
Facility location is an important decision-making
problem in supply chain network planning, which determines
the pattern, structure and the shape of the whole logistics
system. In the past few decades, many studies have proved
that the reasonable facilities location is a primary lever for
companies to reduce the cost and improve its core
competitiveness. The traditional facility location problem has
been unable to meet the demand, facility location and its
deformation problems, including location-allocation problem,
location-inventory problem, the location-allocation and
inventory problem in etc., have been the focus of much
attention from the scientific community.
In recent years, many scholars have proposed a variety of
heuristic and soft computing methods to solve such a
complex problem. Ghezavati [1] took the location, inventory
and service allocation into account. He proposed a non-linear
stochastic integer programming model to solve the
uncapacitated facility location problem with considering the
service level and the coverage radius restrictions. Tancrez [2]
proposed a nonlinear continuous formulation including fixed,
handling and holding costs for the location-inventory
problem in three-echelon supply networks, and solved this
problem by using a heuristic iterative calculation method.
Kung-Jeng Wang [3] studied the facility location-allocation
978-1-5090-6119-8/16 $31.00 © 2016 IEEE 139
DOI 10.1109/ICEBE.2016.16
problem of two-echelon supply chain network under the
stochastic demand, the literature designed the bi-level
stochastic mixed integer programming model(MILP) and put
forward a genetic algorithm with efficient greedy heuristic
strategy to solve the problem. For the fixed capacity facility
location problem of two-stage supply chain, a simple and
effective genetic algorithm was proposed by Fernandes [4].
Ashfari[5] presented a multi-objective stochastic mixed
integer linear programming (SMILP) model to optimize
the location and the size of facilities and under uncertain,
and based on the objective weighted method of genetic
algorithm, the problem was solved. This model could
minimize the total logistics cost and maximize the customer
satisfaction.
In China, for the location and allocation problem in the
two-stage supply chain, which consists of logistic centers
and customers, Yi Tao [6] designed an improved genetic
algorithm that combined with the Lagrangian relaxation
method. The genetic algorithm encoding was only reflecting
the location problem, the service allocation problem was
solved by using Lagrangian relaxation method. Gengui Zhou
[7] considered a logistics network combined with the
forward logistics and the reverse logistics, and used a genetic
algorithm to optimize the location of its distribution center
and the recycling center. A bi-level programming model of
the two-echelon supply chain was built by Huijun Sun [8],
with considering the common interests between the network
decision-making department and the customers. Xiaohuang
Zhao [9] regarded the uncertain parameters as the fuzzy
parameters, such as the product demand or product capacity
of each branch works, and then established a fuzzy chance-
constrained programming model for the two-stage supply
chain. Genxin Dai [10] considered a regional distribution
system to optimize the decision-making of transit warehouse
and distribution center selection, which consists of a
distribution database, multiple depots and multiple
distribution centers, she designed a hybrid genetic algorithm
with the theory of single parent evolution to solve the
problem. In this paper, the distribution relationship among
various facilities was represented by binary array.
In summary, recent researches on facility location and
allocation problem are more and more mature. However, the
models and algorithms proposed in these paper focus more
on location problem, while weakening the service allocation
problem. Besides, mainly literatures are inclined to solve the
facility location problem and always sets the facility capacity
are infinite with the deformation of two-stage supply chain B. The Parameters and Decision Variables
network 1) The Parameters
Therefore, this paper proposes a mixed integer
The main parameters used in this study are presented in
programming model with the limited capacity facility which
takes the logistics cost including transportation, storage, Tableĉ .
fixed and handling cost into consideration, so as to solve the
multi-facilities location and allocation problem of three- TABLE I. THE PARAMETERS
echelon supply chain. Based on the established mathematical notations illustration
model and the problem characteristics, an appropriate i Demand facilities, i=1,…,I.
improved genetic algorithm is proposed. j Transfer facilities, j=1,…,J
The next four parts of this paper are organized as follows. k Supply facilities, k=1,…,K
Part Ċ describes the MLAP and proposes an integer  Quantity demand of demand facility, unit: t
 Throughput capacity of transfer facility, unit: t
programming model of the MLAP of the three-echelon. Part
 Transport volume between transit facility j and
ċ designs an improved Genetic Algorithm to solve the demand facility i, unit: km
MLAP. Part Č presents a numerical experiment and data  Transport volume between transfer facility j and
analyses, while Part č concludes. supply facility k, unit: km

 Distance from demand facility i to transfer facility j,
II. THE MODEL OF
THE MULTI-FACILITIES LOCATION unit: km

 Distance from supply facility k to transfer facility j,
AND ALLOCATION OF THREE-ECHELON
unit: km
A. Description  Transportation rate from demand facility i to transfer
facility j, unit: RMB/kmgt
The multi-facilities location and allocation problem  Transportation rate from transfer facility j to supply
(MLAP) of three-echelon supply chain is to study a three facility k, unit: RMB/kmgt
level supply and demand network, which consist of multiple
 Variable cost,unit: RMB/t
supply facilities, multiple assessed transfer facilities and  Fixed cost of transfer facility, unit:RMB
multiple demand facilities. Its goal is to obtain the optimal 2) Decision Variables
number and the location of transit facilities, as well as find The decision variables are shown in TABLE Ċ.
the service distribution relationship between facilities. In this
problem, parameters involved in the various facilities TABLE II. THE DECISION VARIABLES
including the need and location of demand facilities, the notations illustration
location, throughput capacity, construction cost, fixed cost  If transfer facility j was selected, Xj=1, else Xj=0
and variable cost of transit facilities, the location and the  If demand facility i selected transshipment facility j, Yij=1,
supply ability, and the transport distance and transportation else Yij =0
 If transshipment facility j selected supply facility k, Wjk =1,
rates, are known to establish a model. Besides, there is only else Wjk =0
one supply for each facility. The structure diagram is shown
in Figure ĉ.
C. Model Establishing
Figure 1. The structure of the multi-facilities location-allocation of three-
echelon In this study, we try to find out the best transfer facilities
number with the objective of minimum transportation cost
and the operating cost of transfer facilities.
GHPDQG
The mathematical model is established as follows:
WUDQVLW Objective function:

VXSSOLHV  = ∑  ∑   
 + ∑   
  +

∑ 
 +   (1)

Constraints:
  ≤  , ∀ ,  (1-1)
Ă 
 ≤  , ∀ , ! (1-2)

Ă  =   , ∀ ,  (1-3)

Q 
 = ∑  , ∀  (1-4)
Q
 =  ∑  , ∀ !,  (1-5)
Ă
∑  = 1 (1-6)
Q
∑  = 1 (1-7)

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 ∑  ≤ " (1-8)
 ≥ ∑  , ∀  (1-9)
∑ ∑  = ∑  (1-10)
∑ ∑  = ∑  (1-11)
In the above model, the equation (1) is the objective
function. Other equations are constraints: Equation (1-3) to
(1-5) expresses the relationship of transport quantities
among the facilities; Equation (1-6) and Equation (1-7) is to
ensure that any one of the facility has only one supply
facility Equation (1-8) indicates that the number of transfer
facilities are less than the total number of transfer facilities;
Equation (1-9) indicates that the throughput capacity of each
used transit facilities can meet its supply; Equation (1-10)and
Equation (1-11) is represents the transport volume
summation of each level is equal to the total demand.
III. AN IMPROVED GENETIC ALGORITHM
The three-echelon multi-facilities location-allocation
problem is a mixed integer linear programming problem,
obviously. So, genetic algorithm can be designed to solve it.
The proposed GA consist of two decisions: how many
intermediate facilities should be set up and the distribution
relationship between demander and supplier.
A. Encoding
This GA designs the chromosome with using real-coded
technique. Each chromosome is directly expressed as a
solution, and the chromosome is represented by a vector,
which is defined as V.
V=˄$% ˈ$& ˈ$' ˈ…ˈ$* ˈ-% ˈ-& ˈ-' ˈ…ˈ- ˅
In the formula: $ =  represents demand facilities i is
served by transfer facilities j ˄1≤j≤J˅; - = ! represents
supply facilities k render services for transfer facilities j
˄1≤k≤K˅; - = −1 indicates transfer facilities j is not be
set up, that is to say, the corresponding supplier should set to
-1 for unused transit facilities.
B. Initializing chromosome population
The generation of initial population is shown as follows:
(1) Generate an initial population of N chromosomes,,
and set $ = 0, - = 0.
(2) For chromosome n, the following steps should be
performed;
(3) Generate a random positive integer . range from 1 to
J, and set $ = . ;
(4) Repeat steps (3) I times until the values of first I gene
of the chromosome are updated, ˗
(5) Generate a random positive integer / range from 1 to
K, and set - = / :
(6) Repeat steps (5) J times until the values of genes from
I+1 to J of the chromosome are updated.
(7) Check genes from 1 to I, if the transfer facility j is not
included in the former genes (total number is I), then set the
value of gene I+j to -1;
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(8) Check constraints (1-9), ensure the total handing
capacity of the selected transfer facility which is corresponds
to the specified chromosome. If the total handling capacity of
transfer facilities are greater than or equal to the total
demand facilities, perform the following actions; If not, then
proceed to step (3), and rebuild the chromosome.
(9) Repeat steps from (2) to step (9) until the total
number of chromosomes are N.
C. Selection operator
In this paper, the sequential selection method is adopted
to select the initial population, which can fix the selection
probability.
The specific solution procedure is described as follows:
firstly, assumed the population size is N and compute the
fitness value 23 of each individual in the population; then
individuals can be sorted by the fitness value. The individual
selection probability with the maximum fitness value can be
defined as q, so the probability of the nth individual after
sorting is:
5×(%65)789
43 = (2)
%6(%65):
Finally, the roulette selection method is used to
determine the selected frequency.
The fitness value of chromosome is equivalent to the
reciprocal of the objective function (total cost). In other
words, the total cost is inversely proportional to the fitness.
The calculation formula for fitness and objective function is
shown as follows:
23 = 1; (3)
D. Crossover and mutation probability
Crossover probability and mutation probability are the
key parameters of genetic algorithm, which directly affect
the convergence of the algorithm. The suitable crossover
probability and mutation probability can speed up the
convergence of the algorithm and avoid the algorithm
falling into local optimum. Therefore, an adaptive
improvement method is proposed to determine the crossover
and mutation probability. The formulas are as follows:
@9 (ABCD 6AE )
ˈ2> ≥ 2HIJ
<> = ? ABCD 6ACFG (4)
K& ˈ 2> < 2HIJ
@P (ABCD 6AB )
ˈ2O ≥ 2HIJ
<O = ? ABCD 6ACFG
(5)
KQ ˈ 2O < 2HIJ
2STU —Maximum fitness
2HIJ —The average fitness.
2> —The larger fitness value of the two crossover
individuals.
2O —The fitness value of mutation individuals.
K%ˈ K& ˈK' ˈKQ —Value of (0, 1).
E. Crossover operator
Any two individuals in the crossover operation can
produce new individuals, which can be corresponding to two
individuals and still meet the constraint conditions of the
model. In this paper, the two-point crossover method is
proposed, the specific procedure is expressed as follows:
(1) According to a certain order to select the population
pairs, if the population is odd, perform the crossover for last
single row.
(2) Choose one pair of chromosomes with the prescribed
order, generate a random number in [0ˈ1). If the random
number is greater than the probability of crossing<> , then
implemented crossover operation, otherwise, choose the next
pair of chromosomes.
(3) Randomly choose intersections Point1 and Point2,
I>=Point2>Point1>=1.
(4) Exchange the genes between the two chromosomes
intersections from Point1 to Point2.
(5) Carry out the following actions for the first
chromosomes.
(6) Check every gene from 1 to I, and making sure
whether the value of the target gene cover the various integer
values in [1ˈJ]. If is not be covered, then set the value of
gene I+j to -1.
(7) Examine the gene segment obtained by crossover,
and contrasted with the former gene˄from 1 to I˅.If a
certain genetic value in the gene segment is not included in
the assemblage of former genetic values, which are not
perform the cross operation yet, it obviously represents the
gene is new. For the new gene value pˈreplace the gene
value of the first chromosome on the gene p+I locus with the
gene value of the second chromosome on the gene p+I locus.
(8) To do the same operation for the second chromosome.
Then, generate two new chromosomes.
(9) To determine whether the newly generated two
chromosomes satisfy the constraints of the model, If the new
chromosomes meet the constraints, replace the paternal
chromosomes, otherwise, repeat step (3).
(10) Repeat the steps from (2) to (9) continuously, until
all the paired chromosomes are selected for one time.
For example, there have chromosomes are (3ˈ|1ˈ2ˈ2ˈ
3|ˈ1ˈ3ˈ1ˈ1ˈ3ˈ1ˈ2ˈ1ˈ-1), (2ˈ|1ˈ1ˈ1ˈ4|ˈ2ˈ
4 ˈ 2 ˈ 1 ˈ 4 ˈ 2 ˈ 2 ˈ -1 ˈ 1), (K=2 ǃ J=4 ǃ I=10), the
intersections are Point1=2 and Point2=5. From the encoding,
it can be seen that the first chromosome is not enable the 4th
intermediate facility, the second one is not enable the 3th
intermediate facility.
After the crossover operation, the gene 2 is lost in the
former genes (from 1 to 10) of the first chromosome as well
as equal to shut down the second intermediate facility.
What’s more, add the gene 4 to the first chromosome, it
means the 4th intermediate facility is set up. In the second
chromosome, gene 3 is added to the previous genes, which is
from 1 to 10, that is to say the 3th intermediate facility is set
up.
Therefore, the changes of chromosomes are shown as
follows:
(1) Exchange the genes between the two chromosome
intersections from Point2 to Point5, and get two new
chromosomes, chromosome 1 : (3ˈ|1ˈ1ˈ1ˈ4|ˈ1ˈ3ˈ1ˈ
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1ˈ3ˈ1ˈ2ˈ1ˈ-1), chromosome 2˖(2ˈ|1ˈ2ˈ2ˈ3|ˈ
2ˈ4ˈ2ˈ1ˈ4ˈ2ˈ2ˈ-1ˈ1)˗
(2) Due to the gene 2 is lost in the former genes (from 1
to 10) of the first chromosome, so update the first
chromosome, change the 12th gene value to -1.Then, get a
new chromosome: (3ˈ|1ˈ1ˈ1ˈ4|ˈ1ˈ3ˈ1ˈ1ˈ3ˈ1ˈ
-1ˈ1ˈ-1)˗
(3) Because add the gene 4 to the first chromosome, so
update the first chromosome , replace the value of the 14th
gene in the first chromosome by the same loci in the second
chromosome, .Then, get a new chromosome: (3ˈ|1ˈ1ˈ1ˈ
4|ˈ1ˈ3ˈ1ˈ1ˈ3ˈ1ˈ-1ˈ1ˈ1)˗
(4) In the second chromosome, gene 3 is added to the
previous genes, which is from 1 to 10, so update the second
chromosome, replace the value of the 13th gene in the
second chromosome by the same loci in the first
chromosome, obtain a new chromosome: (2ˈ|1ˈ2ˈ2ˈ3|ˈ
2ˈ4ˈ2ˈ1ˈ4ˈ2ˈ2ˈ1ˈ1).
F. Mutation operator
Exchange mutation refers to exchange genic value
between two locus chosen by accident in individual coding
string, so that result in a new individual. The solution
procedure as follows:
(1) Choose a chromosome from the population with the
specified order, carry out the operate from step (2) to (9);
(2) Generate a random number in [0,1], and determine
whether the random number is greater than the mutation
probability. if the answer is yes, take the operate from step (3)
to (9), else, turned to the step (10).
(3) Generate a random number in [1,2], If the value of
this random number is 1, carry out the step from (4) to (5), it
is equivalent to take variation on transfer facilities which
provide services to demand facilities, otherwise, perform
steps (6) to (7), that means the variation on supply facilities
would be taken that render services to transfer one.
(4) Generate two random numbers in [1, I], respectively
for Point1, Point2, set 1<=Point1<Point2<I, exchange the
gene of these two position in chromosome so as to get the
aim of taking variation on transfer facilities which provide
services to demand facilities.
(5) To determine whether the newly generated
chromosome satisfy the constraints of the model If satisfied,
then replace the original chromosome, otherwise, perform
this step again.
(6) Generate a random number in [I+1, I+J], respectively
for Point1, Point2, and I+1<=Point1<Point2<I+J, If both of
the two genes values are not equal to -1, exchange the genes
of the two positions in this chromosome, so as to realize the
exchange of supply facilities of the implement. If there is
only one gene value is not equal to -1, perform step (8), this
operation means set up one implement facility, otherwise,
repeat this step again.
(7) To determine whether the newly chromosome satisfy
the constraints of the model, which have been exchanges. If
satisfied, then replace the original chromosome, otherwise,
repeat this step.
(8) Implement the single point mutation method for the
supply facilities of the Implement facilities. Randomly J4 13 6 17 30
generated a number in [I+1, I+J), named Point3, set J5 12 17 46 18.5
I+1<=Point3<I+J. Then randomly generate a random number J6 7 9 23 25.5
in [1, K), defined it as Supplier, and 1<=Supplier<K. If the J7 11 23 49 10.5
gene value of Point3 is not equal to -1, it will be changed to J8 8 19 25 22
Supplier.
TABLE V. UNIT TRANSPORT MILEAGE FROM TRANSFER FACILITY TO
(9) To determine whether the newly chromosome satisfy USER
the constraints of the model, which have been exchanges. If
satisfied, then replace the paternal chromosome, otherwise, [XZ (km)
 
repeat step (3). J1 J2 J3 J4 J5 J6 J7 J8
(10) Perform steps from (2) to (9) continuously, until all I1 20 17 16 8 23 18 7 22
I2 16 18 24 11 13 12 16 18
chromosomes are selected for one time. I3 25 6 15 23 15 26 10 13
G. Termination condition I4 12 14 8 23 20 10 9 20
I5 9 21 5 18 10 19 8 9
The proposed algorithm satisfies a certain termination I6 27 13 8 10 18 18 9 12
condition. The whole process of genetic algorithm is an I7 8 15 21 16 12 12 18 24
iterative process operationˈso that the termination condition I8 16 20 12 16 16 20 15 19
I9 16 19 23 21 18 15 20 8
in this study can be designed to reach the largest number of I10 17 15 14 19 20 9 12 21
iterations, or stops iterative as the change of population I11 18 14 21 10 12 15 10 22
average fitness in several generations is very small. I12 20 14 9 18 21 26 17 7
I13 22 20 22 25 11 18 15 24
IV. A NUMERICAL EXPERIMENT I14 12 17 19 24 15 23 21 20
I15 20 16 18 20 9 18 15 25
With the adequate supply, assume that a logistics
I16 19 21 10 10 20 18 15 26
company have two supply based K1 and K2, which supply I17 22 15 18 15 24 20 23 22
goods for 20 demand users, these users are located in I1, I18 18 16 8 20 24 10 15 21
I2, …, I20. According to the feasibility analysis, there also I19 16 18 15 10 22 16 15 25
have 8 alternative transit facilities, respectively as J1, J2, …, I20 10 17 15 23 15 12 8 10
J8. The unit variable cost of each transfer facility is 2.5 yuan
per ton, the values of other known parameters are given in a TABLE VI. TRANSPORT PATES FROM TRANSFER FACILITY TO USER

tabular manner (TABLEċ~TABLE Ď). Find the optimal ]XZ (km)

number of transit facilities and service distribution between  
facilities with the goal of minimum transportation cost and J1 J2 J3 J4 J5 J6 J7 J8
transit facilities operating costs. I1 35 10.5 30 15 52 89 39 30
I2 40 44 50 44 37 17 65 45
TABLE III. QUANTITY DEMAND OF DEMAND FACILITIES AND THE I3 15 21 45 15 60 55 10 50
FIXED COST OF ALTERNATIVE TRANSIT FACILITIES
I4 10 48 18 70 82 36 13 67
WX (t) WX (t) YXZ (million yuan)
I5 19 32 26 65 16.5 12 18 48
I1 22 I11 15 J1 275
I6 10 29 29 85 60 33 18 13
I2 13 I12 19 J2 300
I7 12 45 65 14 20 64 12 30
I3 35 I13 10 J3 500
I4 13 I14 20 J4 150 I8 25 51 50 28 35 48 10 60

I5 18 I15 22 J5 250 I9 18 55 35 40 10 25 28 15
I6 14 I16 15 J6 380 I10 66 10.5 20 65 45 20 47 80
I7 26 I17 9 J7 120 I11 50 35 30 17 13 12 30 60
I8 18 I18 12 J8 400 I12 20 12 22 50 20 44 14.5 27
I9 13 I19 16 I13 25 27 65 56 40 55 26 30
I10 23 I20 15 I14 30 65 80 75 60 16 19 50
I15 50 25 30 30 60 12 75 44
TABLE IV. UNIT TRANSPORT MILEAGE AND TRANSPORT RATES FROM
TRANSFER FACILITY TO USER I16 40 47 40 50 11.5 10 30 38
[Z\ (km) ]Z\(yuan/kmЬ
Ь t) I17 55 36 70 12 55 35 28 50

K1 K2 K1 K2 I18 45 20 65 65 48 50 15 26
J1 14 19 11 15
J2 24 20 15 20 I19 35 65 20 40 37 12.5 35 50
J3 9 16 24 24 I20 50 11 20 40 12 15 28 35

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 Using MATLAB to design the improved genetic coding technique and adaptive method, in particular, the
algorithm and solve the established model. From the coding of improved genetic algorithm not only embodies the
MATLB operation results, we can see that J1, J2 and J7 location, but also contains the service allocation. Finally, a
were selected from 8 alternative centers, and the numerical example was given to show the effectiveness of
corresponding minimum logistics cost is 10.88E+06 yuan. the proposed algorithm and the feasibility of the model, so as
The final location results of the alternative transfer facilities to provide decision support for supply chain network
and service assignment relationship are shown in and planning.
TABLE ď.
ACKNOWLEDGMENT
TABLE VII. SERVICE ALLOCATION QUANTITY OF THE TRANSFER The research is supported by National Science and
FACILITIES Technology Support Program Grant No.2014BAH24F02.
I 1 2 3 4 5 6 7 8 9 10
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