Multiproduct Distribution Network Design of Third-Party Logistics Providers with Reverse Logistics Operations

Abstract

Reverse logistics—the distribution activities involved in product returns—is receiving growing attention. Because of the differences in and interaction between forward and reverse distribution, figuring out how to integrate the two channels has become an urgent issue. Many companies use inefficient, slow, and expensive processes for handling returned products, and many are either incapable of or unwilling to enter the reverse logistics market. Thus, more and more companies are outsourcing their distribution operations to third-party logistics providers (3PLs). In practice, 3PLs usually serve a number of clients that handle multiple products. Thus, the multiproduct aspect must be considered in any distribution network design for 3PLs. Nonetheless, almost all existing research in this field focuses only on the separate reverse distribution and homogeneous product. This paper addresses an integrated forward and reverse distribution network design problem for 3PLs that involves locating distribution facilities such as warehouses, collection centers, and hybrid warehouse–collection centers and determining the strategy for distributing multiple products between the clients of the 3PLs and the customers via the distribution facilities. A genetic algorithm with two greedy algorithms is used for solution purposes. Computational experiments demonstrate a great deal of promise for this solution method, as high-quality solutions are obtained while expending modest computational effort.