The integration of location and inventory decisions in supply chain networks: A literature review and future prospects

Abstract

Supply chain network design, a critical aspect of supply chain management, involves determining the physical network through which goods flow from suppliers to end customers. Strategic decisions involve locating facilities, capacity planning, and sourcing, which are crucial for cost-effectiveness and competitiveness. Traditionally, companies make these decisions in isolation, neglecting their interconnectivity with tactical and operational decisions. However, modern challenges such as evolving market dynamics and increasing competition necessitate integrated decision-making, particularly in inventory management and facility location, to enhance supply chain efficacy. Operations research and operations management techniques, such as the modeling of joint location and inventory decisions as a location-inventory problem (LIP), offer support in this integrated approach. In this paper, we present a review of recent contributions in the field of LIP research through an elaborated classification framework, which expands upon an existing classification framework. Our review reveals prevalent modeling assumptions in the current literature on LIP and provides insights into the evolving landscape of LIP research. By critically questioning these assumptions, we highlight the need for more realistic approaches in future LIP research. Based on this review, we identify specific future research directions, emphasizing their relevance to different contexts of LIP. Finally, we propose specific suggestions for future reviews.