Locating spare part warehouses using the concept of gradual coverage - A case study

In covering problems demand is usually covered by a facility, if it is less than a certain distance away., but if the distance is greater, none of the demand is covered. With gradual coverage, a fraction of the demand can be covered between an upper and lower distance. In this paper a case study for MAN Diesel SE is presented, where gradual coverage has been used for locating warehouses for spare parts. In particular it is described, how coverage decay functions are found, which identifies customers’ reaction to the offered ’speed of delivery’ and ’total order cost’. With these functions, demand at each demand node, given which candidate site supplies that node, can be found. A MILP model is developed, that also considers modality selection.