Optimization of Warehouse Location and Inventory Management for an Industrial Textile Manufacturer Company in Türkiye

Abstract

In this study, we consider the demand forecasting, facility location, and inventory management problems of an industrial textile manufacturer company in Türkiye. First, we begin with the demand forecasting problem for thirty-two different products and employ ABC analysis to categorise the products. Then we test multiple forecasting methods and find out that Exponential Smoothing and Croston's TSB methods perform better in our categories. Using the demand forecast results in the facility location problem, we search for a location in Europe for a warehouse. For the facility location problem, we use a mixed-integer nonlinear mathematical model to minimise the transportation cost, and warehouse rental cost. We solve the model by using GAMS Solver. Then, we handle the inventory management problem and determine the quantity of the products that are sent from the factory and the warehouse to the customer. We propose a genetic algorithm approach that generates reorder quantities and reorder points for both the factory and the warehouse to minimise the total logistics costs, including holding, ordering and stockout costs. We use simulation models to calculate the logistics costs then we use these costs as fitness values to choose the best reorder quantities and reorder points. The proposed approach offers improvement in demand forecasting, inventory management, and facility location problems and brings up a 26% reduction in total logistic costs.