North-Holland
Case Study
Keywords: Fertiliser distribution (application), warehouse location, mixed 0-1 integer linear program
1. Introduction
points is known. Warehousing costs have three components, the fixed cost for locating a warehouse at a
point, the cost proportional to the size of space booked and the inventory handling charge proportional to
the quantity handled. The transportation and the production costs are approximately linear.
The decision makers have to decide, in a multiperiod context, at which rake and secondary points to
locate warehouses, the size of warehouses, the amount of inventory to be stocked at each of these
warehouses, the transportation plan to meet the demand and how much to produce at each of the fertiliser
plant in each subperiod. Severe restrictions exist on the quantities that can be transported in various
directions as the number of the railway wagons and the heavy commercial vehicles available at a point is
limited. The warehouse space available at various points is also limited. The warehousing corporations
have imposed the condition that the fertiliser companies should book space for a period of at least three
months.
2. Previous work
The facility location problem has been attempted by Kuhn and Hamburger [11], Khumawallah [10] and
Jacobson [9], Feldman [4] and Cornuejols et al. [3]. They have suggested heuristics which produce good
solutions in a reasonable computational effort. Geoffrion and Graves [7] have developed two formulations
of the multicommodity distribution problem and have shown that the solutions of one formulation always
dominated that of the other. Lagrangean relaxation has been used for the facility location problem by
Geoffrion and McBride [8], Christofides and Beasly [2], and Van Roy [13].
The distinguishing features of the present problem are that decision makers have the choice of booking
a warehouse of any size; there are multiple stages in the distribution chain and it is required to locate
warehouses at two stages; due to severe restrictions, a particular point may receive fertiliser from many
points of the previous stage and finally the fertiliser demand is seasonal.
3. Problem formulation
In this paper the plants, rake points, secondary points and markets, will be referred to as points of type
"1", "2', "3" and "4" respectively.
The beginning and ending inventory at point number j of point type i in period k of product type h is
represented by Bijkh, Eijkh respectively; Lij is the location variable which is 1 if it is decided to locate a
warehouse at point number j of point type i (where i varies from 2 to 3) and 0 otherwise. The quantity
produced at plant number j (point of type 1) in period k of product type h is denoted by Pl,jkh; QTR4jkh
is the quantity received at market number j (point of type 4) in period k of product type h and the space
booked at point number j of point type i in the first and last three months of a six monthly season is
denoted by SI~j, S2~j respectively. The total quantity transported from point number j l of point type il to
point number j2 of point type i2 in period k of product type h is represented by Til,jl,i2,j2,k,h; TTij k
denotes the total quantity transported from point number j of point type i in period k.
A cropping season of six months duration is divided into K number of periods (for convenience
assumed even); H is the number of products and U denotes the number of nutrients. The quantity of
nutrient demanded of type u at market j (point of type 4) in period k is denoted by D4jk, while fhu is the
fraction of nutrient of type u obtainable from product of type h.
26 R.R.K. Sharma / Modellinga fertiliser distribution system
The total number of points of category i is N(i); SN(i, j ) is the set of points of type i + l to which a
point of type i having a number j can supply fertiliser, and RN(i, j ) denotes the set of points of type
i - 1 from which a point of type i having a number j can receive fertiliser.
Variables in Section 2.1 have lower and upper limits and an associated cost co-efficient and these
constants are denoted by putting " L " and " U " and " C " respectively before variables names. For example
LPljkh, UPljkh and CPljkh are respectively the lower limit, upper limit and unit cost of variables Pljkh for
all j, k and h.
Distribution cost is composed of the production cost: CPljkh * Pajkh; cost of space: CSlij *SI~j +
CS2ij*S2~j; cost of carrying inventory: 0.5*CI~jkh*(Eijkh +B~jkh ), and the fixed cost of locating a
warehouse: CL~j * L,j. The cost minimisation problem is set up as follows.
Problem (P1)
minimizes Y'~ CPljkh * Pljkh + ~_, CTijkpmn * Tijkpmn + E CIijkh * ( Eijkh "}- nijkh) *0.5
jkh ijkpmn iJ'kh
3.4. Constraints
Totally there are K * H number of subproblems (Figure 1) and for each subproblem (of a particular
period and a particular product), the constraints (1) to (4) are present. The equations (1) and (2) are the
material balance conditions at the plants and at the rake and the secondary points, respectively. The
equations (3) set the lower and the upper bounds on variables; and the equations (4) ensure that the
demand is satisfied.
/
, )' ggga
_ '' / ,'' ' , \~ Ii // \, .I/ I-' " ,,
4, // 3 v,/i o ,er
\ // ~ ri-/ ~ ~-' .... --"~._., .......
\ ,,-- e~n ! / ein ,11 ein
\ II I/ II' bin-beginning inventory
" . " ein - ending inventory node
. . . . .
H
TTij,= }--'. ~ T/j(i+i)~,h for i = 1, 2, 3, j = 1 ..... N(i), k = 1 ..... K, (7)
h=l x~SN(i,j)
H
E, skh~S1,j fort=l,2,3, j = l ..... N(i), k = l ..... K, (8a)
h=I
H
y ' E , jkh~S2 o for i = l , 2, 3, j = l ..... N(i), k=K+l ..... K. (8b)
h=l
The nutrient requirements are met by the equations (5). These constraints are not necessary for the case
of a single product and a single nutrient problem, as the equations (4) suffice. The constraints (6) denote
the condition that the opening inventory in a period is equal to the ending inventory of the previous period
and (7) is an expression for the total quantity transported from a point. The total inflow at a point is kept
within the space available by the equations (8).
The constraints (5) to (8) link the variables appearing in the subproblems represented by constraints (1)
to (4).
3. 4. 3. Location constraints
TTijk, Tit ,jl ,i2,j2,k,h, Eijkh, BGkh, QTR4jkh, PU*h, Slij, S2ij>0
The equations (10) are the non-negativity constraints on all the real variables while (11) indicates that
the integer variables assume zero-one values.
28 R.R.K. Sharma / Modelling a fertiliser distribution system
4. Solution method
The Benders' decomposition procedure, used to solve problem (P1), is described below.
Let X denote the polyhedron due to constraint (1) to (4) in the problem (P1). Then for a particular
value of y, the problem becomes as follows:
Problem (P2)
minimize CX
subject to x x, (12)
Bx = b, (13)
Dx = f - Ey, (14)
x >/0 real,
y = (0, 1) integer and known.
In problem (P2), any point x ~ X can be represented as a convex combination of extreme points of X,
as follows:
T T
x= ~?~j*xj, Y'~Y~j=I, )~j>~0 forj=l . . . . . T.
j=l j=l
It is assumed that there are T extreme points of the polyhedral set X and these are xj ( j = 1. . . . . T).
Using the above, problem (P2) can be posed as follows:
Problem (P3)
T
minimize Y'. cxj * Xj
j=l
T
subject to ~ Bxj * Xj = b, (15)
j=l
T
Dxj * Xj = f - Ey, (16)
j=l
T
E xj = 1, (17)
j=l
Xj>~O for all j = l . . . . . T,
y = (0, 1) integer and known.
Problem (P3) is the primal problem and the dual variables corresponding to equations (15), (16) and
(17) are denoted by u, v and w, respectively. Then the dual problem is
Problem (P4)
maximize ub + v ( f - Ey ) + w
T T T
subject to u B(xj)+v Y'.D(xj)+w<<, E c ( x j ) ,
j=l j=l j=l
u, v and w unrestricted in sign.
Let us denote the polyhedron of problem (P4) by M. Let us denote the extreme points of M by
(u p, vP, w p) where p = 1 . . . . . P (assuming that there are P extreme points) and extreme rays by
R.R.K. Sharma / Modelling a fertiliser distribution system 29
(u~, v~, w~) where s = 1 . . . . . S (assuming there are S extreme rays). It is also to be noted that M is
independent of y and thus, no matter what the value of y, the optimal value of problem (P4) occurs at one
of the extreme points of M or grows unbounded along one of its extreme rays of M. Now, if for some y
there exists an s, such that
u~b + vsl( f - Ey ) + w~ > O,
then the optimal value of problem (P4) is unbounded. The converse is also true.
When problem (P4) is unbounded, then it means by the dual theorem of linear programming that
problem (P3) (the primal problem) has no solution for that y. Therefore,
u~b+v~(f-Ey)+w~<~O for a l l s = l . . . . . S
provides necessary and sufficient conditions on y to permit feasible x to the mixed integer program (P1).
Then problem (P4) becomes as follows:
Problem (P5)
max uPb + v P ( f - Ey) + w p
p=l ..... P
Clearly, for all the feasible solutions of problem (P3) it is possible to construct feasible solutions to
problem (P7) with arbitrary values of si and hence they are equivalent problems. Problem (P1) is
transformed into pure integer program (referred to as problem (PS)) by using p_roblem (P7). Problems (P6)
and (P8) have the same structure. Let Xs be the array of extreme points of X such that the i-th extreme
point, Xsi, is stored in the i-th column; then X~ can be constructed as follows.
The constraints (13) of problem (P2) are dualised and included in the objective function, and the
subgradient procedure is used to update the value of the multipliers. Lagrangean relaxation technique is
described in Fisher [5] and Geoffrion [6], and is described here very briefly. Consider
Z = m i n cx (P)
subject to Ax=b,
D x <~e,
x>~O,
where x is n x 1, b is m X 1, e is k X 1 and all other matrices have conformable dimensions.
Let us say that the constraints of (P) are partitioned into two sets A x = b and D x ~< e, so that the
following problem can be easily solved.
Zd(U ) = min cx + u ( A x - b) (LR(u))
subject to D x <~e,
x>~0,
where u = { u(1), u(2) . . . . . u(m)} is a vector of Lagrangean multipliers.
R.R.K. Sharma / Modelling,a fertiliser distribution system 31
The best choice of u gives the optimal solution to problem (DP). The value of u can be found by
different methods. The subgradient procedure is a widely known procedure for updating the values of u.
Subgradient procedure is explained below.
Given an initial value of u 0, a sequence u k is obtained by the rule
Uk+l = Uk + tk * ( A X k - - b),
where x k is an optimal solution to LR(uk) and t k is a positive step size. The step size commonly used in
practice is
tk = Pk * ( Z ( * ) - Z d (u k ) ) / N o r m ,
where Norm = ( A x k b) 2 and 0 ~<Pk ~ 2.0.
-
Bij(k+ 1)1 = E, jkl for i = 1 , 2 , 3 , j=l ..... U(i), k=l ..... K-l, (22)
Multipliers for equations (22), (23) and (24) are denoted by usj k, v~jk and w~9k respectively.
Starting values for the multipliers were chosen as follows:
u,j k = O for i = l , 2, 3, j= l,..., N(i), k=l ..... K-l,
Multipliers for equations (25), (26), (27), (28) and (29) are denoted by U~jk, vl~jk, V2~jk, wl,jk, W2,jk
respectively.
32 R.R.K. Sharma / Modelling a fertiliser distribution system
Feasibility of the primal problem (P7) is ensured to a great extent by including a set of linear
constraints in problem (P8). These linear constraints ensure that (see Figure 1) the maximum flow possible
between every two successive stages is greater than or equal to the cumulative demand in that subproblem.
It was found that, on an average, for problems of different sizes, relaxation (LR2) converged in around
one third the number of iterations taken by relaxation (LR1) (see Table 1). In relaxation (LR2), the
relative cost coefficient of warehouse space booked is a function of multipliers which determine the
relative cost coefficients of beginning and ending inventories, whereas, in relaxation (LR1), the relative
cost coefficient of warehouse space booked is a function of multipliers which determines the relative cost
coefficients of ending inventories only. This could result in a better adjustments of multipliers in relaxation
(LR2) so that it is able to terminate in fewer iterations as compared to relaxation (LR1). Relaxation (LR2)
was developed after observing slower convergence of certain multipliers in relaxation (LR1).
Obtaining primal feasibility was found to be sensitive to the starting value of Pk used. We used the
starting value of p~ as 1.5 and halved it after every 10 iterations. If primal feasibility was not obtained,
then slight tinkering with the starting value of Pk produced the desired result. Primal feasibility was
attained in all the thirty eight problems that were attempted and the duality gap was less than 5%. Thus,
the heuristic solution procedure appeared to be computationally attractive.
Four problems were prepared by collecting the data from a fertiliser company in India. The existing
accounting systems in the company do not maintain the relevant costs associated with the decisions, and
hence, a considerable effort was spent in going through the accounting records to prepare the relevant
Table 1
Average performance of relaxations (LR1) and (LR2)
Relaxation type Avg. no. of iterations
Lagrangean relaxation 1 101
Lagrangean relaxation 2 31
R.R.K. Sharma / Modelling a fertiliser distribution system 33
Table 2
Computational results
Problem Number Number Number Number of Time taken
number of var. of int. var. of constr. Benders' on VAX-750
iterations
1 3180 37 6028 3 4 hrs.
2 3180 37 6028 10 10 hrs.
3 2098 31 3930 2 3 hrs.
4 3760 51 7078 3 15 hrs.
costs required in the problem formulation. The four problems were optimally solved by the model and the
computational results are given in Table 2. The use of OR models has underscored the need to obtain the
relevant costs associated with the decisions. The management accounting systems serve this purpose as
traditional accounts do not supply this kind of information.
The feasibility constraints included in problem (P8) (Section 4.3) greatly reduced the number of
Benders' iterations. When these problems were solved without these constraints, the optimal solution could
not be produced in twenty iterations. (The process was terminated as the computations are expensive.)
Benders' cuts once generated can be stored and used later. When the demand pattern changes
marginally, the optimal solution of the previous problem can be used as a good starting solution which
reduces the number of Benders' iterations required to produce the optimal solution.
Computer implementation produced the warehouse location and production-allocation plan in few
hours of time whereas the distribution managers took a few days to produce a feasible solution manually.
The demand forecast normally gets revised around three to four times in a season of six months which
makes the task difficult. The model presented here is useful as it gives solutions in a reasonable time.
Algorithm was implemented on a VAX-750 at the Indian Institute of Management, Ahmedabad, India.
A constraint generator was developed to prepare all the constraints and the subproblems. The out-of-kilter
algorithms was used to solve the rain-cost-flow network subproblem as the code was easily available.
Provision was made to store the solution of each subproblem, so that the next iteration could be started
from the optimal solution of the previous iteration. This helped to reduce the kilter n u m b e r encountered
during the successive iterations. Each of the linking constraints has a maximum of six variables with
nonzero coefficients and hence, linked list was used for its representation. Such a scheme resulted in the
savings in the computer storage required and also reduced the computational time. The code was
developed by the author himself and the total program size was approximately 20 000 lines and the CPU
time consumed in code development was more than 1440 hours. The terminal connect time was more than
7380 hours.
6. Conclusions
In this paper, the application of Benders' decomposition to the problem of fertiliser distribution is
demonstrated. The primal problem was attempted by two Lagrangean relaxation procedures and one of
these converged at a faster rate. The model developed here serves as a good aid to making decisions and
routine sensitivity analysis is possible as complete information on dual variables is available.
Acknowledgment
The author wishes to thank Prof. A. Tripathy and Prof. P.R. Shukla for the constant encouragement
provided by them. The author also likes to thank the various executives of the Indian Farmers and
Fertilisers Co-operative Ltd. for arranging the data required.
34 R.R.K. Sharma / Modelling a fertiliser distribution system
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