A heuristic algorithm for solving a competitive facility location and design MINLP problem for firm expansion

L. Anton-Sanchez, B. G.-Tóth, J. Fernández, J. L. Redondo, P. M. Ortigosa

A chain wants to expand its presence in a given geographical area of the plane, where it already owns some existing facilities. The available budget can be invested in opening one new facility and/or modifying the qualities of the existing chain-owned facilities. The chain can also close some of its existing facilities in order to invest the money formerly devoted to them to its other facilities or to the new one. In order to decide the location and quality of the new facility (in case it is finally open) as well as the new qualities for the existing chain-owned facilities, a mixed-integer nonlinear programming (MINLP) problem is formulated, whose objective is to maximize the profit obtained by the chain. A heuristic algorithm, which includes a ranking procedure, is proposed to cope with this problem.

Keywords: Facility location, Competition, Quality, MINLP, Heuristic

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