A Two-Stage Model with an Improved Clustering Algorithm for a Distribution Center Location Problem under Uncertainty

Distribution centers are quite important for logistics. In order to save costs, reduce energy consumption and deal with increasingly uncertain demand, it is necessary for distribution centers to select the location strategically. In this paper, a two-stage model based on an improved clustering algorithm and the center-of-gravity method is proposed to deal with the multi-facility location problem arising from a real-world case. First, a distance function used in clustering is redefined to include both the spatial indicator and the socio-economic indicator. Then, an improved clustering algorithm is used to determine the optimal number of distribution centers needed and the coverage of each center. Third, the center-of-gravity method is used to determine the final location of each center. Finally, the improved method is compared with the traditional clustering method by testing data from 12 cities in Inner Mongolia Autonomous Region in China. The comparison result proves the proposed method’s effectiveness.