Integrated decision support framework for distribution network design

In the current business environment of competition shifting from company-to-company to supply chain against supply chain, there is an increasing need for logistics providers (LSP) to gain cost effectiveness with no compromise on service levels. One key initiative that LSP can undertake is to allocate and utilise their storage and transportation assets optimally. The current work is an attempt in that direction and provides a hands-on decision support framework that integrates MCDM, network optimisation, and discrete event simulation to address distribution network design and transport optimisation. The use case of PT Pos Indonesia in the metropolitan area of Greater Surabaya highlights the benefits of combining ICT tools with well-established best practices in supply chain management. Findings of this work highlight that the number of distribution facilities for the case at hand should be reduced from nine to four. Compared to the existing, the identified network configuration unlocks potential cost saving in transportation and warehousing of 18%–22%, reduces CO₂ emissions by nearly 30%, with no deterioration in service level. Managerial implications about transportation policies are highlighted in the conclusive part of this paper.