Applied Mathematical Modelling 34 (2010) 3586–3598

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Applied Mathematical Modelling

journal homepage: www.elsevier.com/locate/apm

Revised multi-choice goal programming for multi-period, multi-stage

inventory controlled supply chain model with popup stores
in Guerrilla marketing
Turan Paksoy a,*, Ching-Ter Chang b
a
Selçuk University, Department of Industrial Engineering, Campus 42031, Konya, Turkey
b
National Changhua University of Education, Department of Information Management, Changhua, Taiwan, ROC

a r t i c l e i n f o a b s t r a c t

Article history: In this paper, we consider a supply chain network design problem with popup stores which
Received 7 October 2008 can be opened for a few weeks or months before closing seasonally in a marketplace. The
Received in revised form 24 February 2010 proposed model is multi-period and multi-stage with multi-choice goals under inventory
Accepted 10 March 2010
management constraints and formulated by 0–1 mixed integer linear programming. The
Available online 17 March 2010
design tasks of the problem involve the choice of the popup stores to be opened and the
distribution network design to satisfy the demand with three multi-choice goals. The first
Keywords:
goal is minimization of the sum of transportation costs in all stages; the second is to min-
Revised multi-choice goal programming
Supply chain network design
imization of set up costs of popup stores; and the third goal is minimization of inventory
Inventory management holding and backordering costs. Revised multi-choice goal programming approach is
Popup stores applied to solve this mixed integer linear programming model. Also, we provide a real-
Guerrilla marketing world industrial case to demonstrate how the proposed model works.
Ó 2010 Elsevier Inc. All rights reserved.

1. Introduction

Guerrilla marketing (GM) was first introduced by Jay Conrad Levinson in the book Guerrilla marketing in 1984, as an
unconventional marketing methods based on a very low budget, by relying on time, energy and imagination instead of
big marketing budgets. Thus, when implementing GM tactics, small size is actually an advantage instead of a disadvantage.
Small or medium sized firms are able to obtain publicity more easily than large companies; they are closer to their customers
and considerably more agile [1].
Levinson identifies the following principles as the foundation of GM [2]:

 Instead of budget, the primary investments of marketing are time, energy and imagination.
 GM is especially geared to small business.
 GM primarily measures the amount of profits, not sales.
 GM is based on the science of psychology-laws of human behavior, instead of experience, judgment and guesswork.
 GM suggests creating a standard of excellence with an acute focus instead of diversification by offering allied products
and services.
 GM encourages you to grow your business geometrically by more transactions with existing customers, and larger trans-
actions, instead of concentrating on growing linearly by adding new customers.

* Corresponding author. Tel.: +90 332 223 2040.

E-mail address: tpaksoy@yahoo.com (T. Paksoy).

0307-904X/$ - see front matter Ó 2010 Elsevier Inc. All rights reserved.
doi:10.1016/j.apm.2010.03.008
 T. Paksoy, C.-T. Chang / Applied Mathematical Modelling 34 (2010) 3586–3598 3587

 GM asks you to forget competition temporarily and to scout opportunities to cooperate with other businesses.
 GM suggests combining of marketing methods instead of using a single method.
 GM urges you to embrace the current technology to empower your business.

Popup stores are new trend in GM: shops that open for a while in a major city or a mall and then they are gone. Com-
panies that want to attract interest are using short lived popup stores. Popup stores are usually placed in the context of
being something of a fashion or trend in retail. The idea inherent in the popup is one of temporary surprise and that can
be very impactful as a marketing tool in GM. The temporary and unlike nature of these stores gives people a reason to take
notice and visit. So, recently some companies are using short-lived ‘‘popup” stores to take advantage of market opportu-
nities [3].
In this study, we consider a supply chain network design problem with popup stores. The design tasks of the problem
involve the choice of the popup stores to be opened and the distribution network design to satisfy the demand with three
multi-choice goals. The first goal is minimization of the sum of transportation costs in all stages; the second is to minimi-
zation of set up costs of popup stores; and the third goal is minimization of inventory holding and backordering costs. Re-
vised multi-choice goal programming (RMCGP) approach [4] is applied to solve this 0–1 mixed integer linear programming
model. We believe that the application of RMCGP should reflect the business needs/characteristics of the specific organiza-
tion under the study. RMCGP can be used, for example, to capture goals related to manpower (hiring/firing personnel is not
only expensive and disruptive, but also subject to union agreements, which limit the flexibility of management), service and
quality levels (i.e., product availability should be within certain lower and upper limits), etc., or can help a public, non-profit
organization deal with its budget allocations (such organizations often handle funds earmarked for specific purposes and
transfers between budget categories are not permitted; as such, imposing goals on individual expense categories would
be valid in this setting). The proposed model differs from the other models in the literature by introducing the multi-choice
concept and location–allocation problem with warehousing function together in supply chain design problem.
Making decisions is part of our daily lives. In fact, the conflicts of resources and the incompleteness of available informa-
tion make it almost impossible for decision makers (DMs) to build a reliable mathematical model for representation of their
preferences. In order to overcome this problem, the DMs try a set of goals to get the acceptable solutions in which the DMs
would like to minimize the deviations between the achievements of goals and their aspiration levels. This is the philosophy
of the GP technique. However, in some cases the author believes that there may exist a situation where the DMs would like
to make a decision on the problem, with the goal that can be achieved from some specific aspiration levels (i.e., one goal
mapping many aspiration levels). To the best knowledge of the author, this problem cannot be solved by current GP ap-
proaches. So the RMCGP is applied to provide a robust and feasible way for solving MODM problem, which involves
either–or choice/multi-choice of aspiration levels.
The remainder of this study is organized as follows. Section 2 presents a review of the literature. Section 3 provides a
summary of RMCGP. The proposed mixed integer linear programming model is presented in Section 4. For illustrative pur-
poses, a numerical example based on a real-world industrial case is given and discussed in Section 5. Finally, conclusions are
drawn in Section 6.

2. Literature of supply chain network design

Supply chain management (SCM) has received considerable attention from academicians and practitioners during the last
several decades. Design and optimization of strategic production-distribution models for SCM is one of the most popular
problems in this research field. Generally, the problem is defined with following entities: (i) location of facilities (plants, dis-
tribution centers, etc.) to be opened; (ii) design of the network configuration; (iii) satisfy customer’s demand with minimi-
zation of the total cost including purchasing cost, transportation cost, fixed operating cost, etc. [5–7].
In their pioneering paper, Cohen and Lee [8] developed a deterministic, mixed integer, non-linear mathematical program-
ming model. Objective function of the model maximizes the total after-tax profit under resource, production and demand
constraints. Output of the model determines global resource deployment policy for the manufacturing plants, distribution
centers and customer regions. Pyke and Cohen [9] present a stochastic mathematical programming model for a tree-stage
supply chain consisting of one manufacturing plant, one warehouse and one retailer. The model minimizes the total cost
under a service level constraint and determines the economic reorder interval, replenishment batch sizes and the order-
up-to levels. The model, however, does not consider multiple products and has only one manufacturing plant, one ware-
house and one retailer, so failed to represent the complicated supply chain networks of the real world. Petrovic et al. [10]
consider a serial supply chain including inventories and production facilities between them in fuzzy environment. For each
inventory, proposed fuzzy model determines the order quantities giving an acceptable service level of the supply chain at
reasonable total cost. They use simulation techniques to examine the dynamics and performance of all the parts of the sup-
ply chain. As a result, it is claimed that uncertain customer demand and uncertain supply delivery along the supply chain
have great impact on the behavior of the supply chain. Although, the model deals multi-stage supply chain, it is confined
to single-period, single-product problems.
Ganeshan et al. [11] examine the sensitivity of supply chain performance to three inventory planning parameters: (i) the
forecast error, (ii) the mode of communication between echelons, and (iii) the planning frequency, by developing a simula-
tion model based on a case study. They show that all the three parameters have a significant effect on performance. Increas-
3588 T. Paksoy, C.-T. Chang / Applied Mathematical Modelling 34 (2010) 3586–3598

ing forecasting errors and the re-planning frequency (for example, planning every quarter instead of every month) decreases
service, return on investment, and increases cycle time. Using a mode of communication that facilitates exchange of infor-
mation between echelons in the supply chain yields a higher level of service when compared to the scenario where the enti-
ties in different echelons plan material flows independently.
Sakawa et al. [12] deal with a decentralized two-level integer programming problem in a housing material manufacturer
having two kinds of third party logistic providers (3PLPs) to transport of products from its factory or warehouse to custom-
ers. There are two objectives in the housing material manufacturer; (i) minimization of the transportation cost, (ii) minimi-
zation of the opportunity loss with respect to transportation time. The objectives of 3PLPs are to maximize their profits. The
proposed interactive fuzzy programming approach derives a satisfactory solution to the problem by taking into account not
only the degree of satisfaction with respect to the objectives of the housing material manufacturer but also those of the
3PLPs. However, the model does not consider production constraints and failed to capture most of the entities (supplier, re-
tailer, etc.) inherent in a global SCM.
Syarif et al. [5] propose a minimum spanning tree based genetic algorithm approach for a multi-stage supply chain prob-
lem formulated by 0–1 mixed integer linear programming model. The efficacy and the efficiency of the method are analyzed
by comparing its numerical experimental results with those of traditional matrix-based genetic algorithm and a professional
software package. Although experimental results show that the proposed algorithm can give better heuristic solutions than
traditional genetic algorithm, the comparison with the performances of other meta-heuristic techniques (tabu search, sim-
ulated annealing etc.) are remained unanswered.
Yan et al. [6] derive a mixed integer programming model for supply chain design with consideration of bills of materials.
They use logical constraints to represent bills of material and the associated relationships among the main entities of a sup-
ply chain such as suppliers, producers and distribution centers. Jayaraman and Ross [13] consider a mixed integer linear pro-
gramming model to determine locations (for distribution centers and cross-docks) and distribution strategies in supply chain
management. They propose a simulated annealing approach for the model which is characterized by multiple product fam-
ilies, a central manufacturing plant site, multiple distribution center and cross-docking sites, retail outlets, and evaluate the
computational performance of the proposed approach under a variety of problem scenarios.
Santoso et al. [14] propose a stochastic programming model and solution algorithm for solving supply chain network de-
sign problems. The model determines supply chain configuration decisions and operational decisions. The configuration
decisions consist of deciding which of the processing centers to build and which processing and finishing machines to pro-
cure. The operational decisions consist of routing the flow of products from suppliers to the customers. Processing/transpor-
tation costs, demands, supplies, and capacities are assumed to be stochastic parameters in the model.
Ko et al. [15] propose a hybrid optimization/simulation approach to design a distribution network for third party logistics
service providers (3PLs) in consideration of the performance of the warehouses.
Paksoy et al. [16] develop a multi-echelon mixed integer linear programming model. The model lets decision maker reflect
his supply policy by determining VIP suppliers and also includes the choice of the facilities (plants or distribution centers
(DCs)) to be opened and design of network configuration with minimum total cost. The total cost involves supply cost (com-
bination of purchasing cost and shipping cost from suppliers); transportation costs between plants and DCs; distribution cost
between DCs and customer zones; fixed operating costs; and opportunity cost not have the material at the right time.
Lin et al. [17] develop a flexible multi-stage logistics network (fMLN) model with nonadjacent structure. In their model,
some non-neighboring echelons are connected with arcs (nonadjacent connecting arcs). They formulate the model as mixed
integer location–allocation problem, and propose a hybrid genetic algorithm to solve the problem.
Tuzkaya and Önüt [18] propose a multi-period multi-item linear programming model with consideration of warehousing
and transportation functions for distributing the sub-products from multiple suppliers to single warehouse and from the
warehouse to multiple manufacturers. Their model is restricted to only two-echelon and does not involve determining loca-
tion strategy of the supply chain.
Altiparmak et al. [19] introduce a solution procedure based on steady-state genetic algorithms for the design of a single-
source, multi-product, multi-stage supply chain network.
Their model determines the choice of facilities (plants and distribution centers) to be opened and the distribution net-
work design to satisfy the demand with minimum cost.
Pokharel [20] propose a deterministic model which involves two objectives, one for minimizing the costs and the other
for maximizing the reliability of supply from an echelon to the following echelon.
Tsai et al. [21] introduce a channel allocation problem which includes decisions of channel mix and capacity allocation for
each distribution channel. They formulate the problem as a fuzzy mixed integer multiple goal programming problem which
includes objective functions such as maximizing net profits, minimizing the rate of end user claims, and minimizing the rate
of late lading, and is subject to constraints regarding manufacturing capacity, customer’s demand, channel capacity, channel
quota flexibility, budget limitations.
Xu et al. [22] propose a random fuzzy multi-objective mixed integer non-linear programming model that includes two
objective functions; minimization of total cost and maximization of customer services, under condition of random fuzzy cus-
tomers demand and transportation cost between facilities.
Liang [23] develops a fuzzy multi-objective linear programming model which includes fuzzy objectives simultaneously
minimizing total costs and total delivery time in relation to inventory levels, available machine capacity and labor levels
at each source, and forecast demand and available warehouse space at each destination and total budget.
 T. Paksoy, C.-T. Chang / Applied Mathematical Modelling 34 (2010) 3586–3598 3589

Farahani and Elahipanah [24] develop a mixed integer linear programming model with two objective functions: minimiz-
ing costs, and minimizing the sum of backorders and surpluses of products in all periods. They also consider delivery lead
times and capacity constraints in a multi-period, multi-product and multi-channel network.
In this study, we extend Tuzkaya and Önüt [18]’s model by involving the multi-choice concept and the determination of
location strategy of the supply chain actors, and also increasing the stages of supply chain network.
In Section 4, we have classified and compared supply chain network design models, which is available in the recent lit-
erature and mentioned briefly here, according to model specifications such as objective functions, model types, solution
techniques and parameters in Table 1.

3. Revised multi-choice goal programming

The goal programming (GP), which is introduced by Charnes and Cooper [25], is a technique for solving decision making
problems with multiple objectives by achieving a set of compromising solutions. GP minimizes the deviations between aspi-
ration levels provided by decision maker for each goal and their achievements.
A simple achievement function of GP can be represented as follows:
X
n
þ 
Min wi ðdi þ di Þ;
i¼1
þ 
s:t: f i ðXÞ  di þ di ¼ g i ; i ¼ 1; 2; . . . ; n;
þ 
di ; di P 0; i ¼ 1; 2; . . . ; n;
x2F ðF is a feasible set;X is unrestricted in signÞ;
where wi is the weight of the ith goal; fi(X) is the linear function of xi, x2, . . ., xn for ith goal, gi is the aspiration level of the ith
þ 
goal, di and di are positive and negative deviations from the target value of the ith goal, respectively.
Chang [26] has recently proposed a new method multi-choice goal programming (MCGP) for multi-objective decision
problems with multiple aspiration levels. The MCGP problem can be expressed as follows [26]:
P
n
Min wi jfi ðXÞ  g i1 or g i2 or . . . or g im j
i¼1
s:t: x 2 FðF is a feasible set;X is unrestricted in signÞ;
where; gij(i = 1, 2, . . . , n and j = 1, 2, . . ., m) is the jth aspiration level of the ith goal, gij1 6 gij 6 gij+1.
The achievement function of the MCGP can be expressed as follows [26]:
P
n
þ 
Min wi ðdi þ di Þ
i¼1

þ  P
m
s:t: fi ðXÞ  di þ di ¼ g ij Sij ðBÞ; i ¼ 1; 2; . . . ; n;
j¼1
þ 
di ; di P 0; i ¼ 1; 2; . . . ; n;
Sij ðBÞ 2 Ri ðXÞ; i ¼ 1; 2; . . . ; n;
x2F ðF is a feasible set;X is unrestricted in signÞ;
where Sij(B) represents a function of binary serial numbers.
Chang [4] has introduced the revised MCGP (RMCGP) approach in order to solve the problem of multiplicative terms of
binary variables used in the MCGP achievement function. So, the achievement function of RMCGP can be formulated as
follows:
n   þ
P   
Min wi di þ di þ ai eþi þ ei
i¼1

þ 
s:t: fi ðXÞ  di þ di ¼ yi ; i ¼ 1; 2; :::; n;
yi  eþi þ ei ¼ g i: min ; i ¼ 1; 2; :::; n;
g i: min  yi  g i: max ; i ¼ 1; 2; :::; n;
þ 
di ; di ; eþi ; ei P 0; i ¼ 1; 2; :::; n;
x 2 F ðF is a feasible set;X is unrestricted in signÞ;
where gi.max is the upper bound of the ith aspiration level, gi.min is the lower bound of the ith aspiration level, yi is the con-
þ 
tinuous variable with a range of g i: min  yi  g i: max ; di and di are positive and negative deviations from |fi(X)–yi|, eþ 
i and ei are
positive and negative deviations from |yi–gi.min|, wi is the weight of the ith goal, ai is the weight of the sum of deviations of
|yi–gi.min|.
3590 T. Paksoy, C.-T. Chang / Applied Mathematical Modelling 34 (2010) 3586–3598

Table 1
The comparison table of supply chain design models.

Model features 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 References

Objective function Cohen and Lee
[8]
Maximization j j j j
Minimization j j j j j j j j j j j j j j j j j Pyke and
Cohen [9]
Multi-level j
Multi-choice j Petrovic et al.
[10]
Multi-objective j j j j j j j
Facility location Ganeshan et al.
[11]
Fixed location j j j j j j j j j j
Variable location j j j j j j j j j j Sakawa et al.
[12]
Number of stages
Single stage j j j Syarif et al. [5]
Multi-stage j j j j j j j j j j j j j j j j
Number of products Yan et al. [6]

Single item j j j j j j j j j j j j Jayaraman and

Ross [13]
Multi item j j j j j j j j
Number of periods Santoso et al.
[14]
Single period j j j j j j j j j j j j j j
Multi period j j j j j j Ko et al. [15]
Model type
Deterministic j j j j j j j j j j j Paksoy et al.
[16]
Stochastic j j
Lin et al. [17]
Fuzzy j j j j
Simulation based j j Tuzkaya and
Önüt [18]
Hybrid j j
Parameters and variables Altiparmak
et al. [19]
Bill of materials j j
Customer demands j j j j j j j j j j j j j j j j j Pokharel [20]
Inventory holding costs j j j j j
Backordering costs j j j j Tsaietal [21]
Supplier lead times j j j j j
Transportation times j j j j j j j Xu et al. [22]
Cycle times j j j j
Reliability of supply j j Liang [23]
Opportunity cost j j
Modeling and solution Farahani and
techniques Elahipanah
[24]
Linear programming j j j
Mixed n integer programming j j j j j j j j j j j j j Proposed
model
Nonlinear programming j j
Stochastic programming j j
Fuzzy programming j j j j
Goal programming j j
Heuristics j j j j j j j
Simulation j j j
Constraints
Production capacity j j j j j j j j j j j j j j j
Distribution center capacity j j j j j j j j j j j
Supplier capacity j j j j j j j j j j j
Customer service level j j j j
Warehousing function j j j j j j j j j
Supply policy j

In industrial cases there are always different but related goals. Especially, we can see this situation in supply chain man-
agement. Minimizing the transportation, inventory, backorder, fixed costs and maximizing the profit, customer satisfaction,
 T. Paksoy, C.-T. Chang / Applied Mathematical Modelling 34 (2010) 3586–3598 3591

Suppliers Warehouse Plants Popup stores Customers

1 1 1 1

2 W 2 2 2

I J K L

Stage 1 Stage 3 Stage 4

Stage 2

Fig. 1. The four-echelon supply chain network.

recycling ratio etc. are generally aimed in supply chains. Although there just are usually general objectives such as men-
tioned above, sometimes decision makers determine upper and lower targets to achieve the goal. Budget, time, human re-
sources constraints or something else cause this situation. We used a revised MCGP method which does not involve
multiplicative terms of binary variables to model the multiple aspiration levels. This makes it easier to implement using
common linear programming packages and easier to understand by industrial participants.

4. Proposed model

Here, we proposed a multi-period, multi-stage and inventory controlled supply chain model with popup stores which can
be opened for a few weeks or months before closing seasonally in a marketplace. The supply chain network includes a ware-
house settled up between suppliers and plants for storing materials as well as popup stores opened between plants and cus-
tomers. The first goal is minimization of the sum of transportation costs in all stages; the second is to minimization of set up
costs of popup stores; and the third goal is minimization of inventory holding and backordering costs. The supply chain starts
with suppliers, warehouse, plants, and potential popup stores and finished with end-customers. The problem considered in
this paper has been from a company which is one of the producers of vegetable oil producers in Turkey. The company is plan-
ning to enter marketing of South East of Turkey. The company wishes to design of SCN for the product, i.e., select the sup-
pliers, plants, and popup stores to be opened and design the distribution network strategy that will satisfy all capacities and
demand requirement for the product imposed by customers. The problem is a single-product, multi-stage SCN design prob-
lem. Considering company managers’ objectives, and aspiration levels we formulated the SCN design problem as a revised
multi-choice goal programming.
The four-echelon supply chain is illustrated above (Fig. 1).

4.1. Nomenclature

Before formulating the model, basic parameters and notations are introduced. Indices used in the model are: i e I, a set of
suppliers; j e J, a set of potential plants; k e K, a set of potential popup stores; l e L, a set of customer zones; t e T, a set of
periods, n e N, a set of goals. The problem parameters and decision variables are defined as follows:

Xit amount transported from supplier i to warehouse in period t

Wjt amount transported from warehouse to plant j in period t
Yjkt amount transported from plant j to popup k in period t
Zklto amount distributed from popup k to customer zone l in period t
Cit unit cost of transportation from supplier i to warehouse in period t
Cjt unit cost of transportation from warehouse to plant j in period t
Cjkt unit cost of transportation from plant j to popup store k in period t
Cklt unit cost of distribution from popup store k to customer zone l in period t
- amount of raw material required to produce one unit of product (raw material/product)
ait capacity limit of supplier i in period t
bjt capacity limit of plant j in period t
ckt capacity limit of popup store k in period t
dlt demand of customer zone l in period t
et capacity limit of warehouse in period t
dkt fixed cost of operating popup store k in period t
a unit inventory holding cost in warehouse
(continued on next page)
3592 T. Paksoy, C.-T. Chang / Applied Mathematical Modelling 34 (2010) 3586–3598

b unit backordering cost

Qt ınventory level of warehouse in period t
Qs safety stock level in warehouse
Si starting inventory level in warehouse
Bjt amount backordered to plant j in period t
A maximum available number of popup stores in a period
wn the weight of the nth goal
an the weight of the sum of deviations of |yn–gn.min|)

4.2. Assumptions

The 0–1 mixed integer mathematical programming model proposed here is based on the following assumptions.

 One kind of product is involved.

 Demand of the plants can be either satisfied or backordered by warehouse, but the backorder must be fulfilled in the next
period.
 Transportation times between stages are ignored.

4.3. Model formulation

" #
XX XX XXX XXX
Min C it :X it þ C jt :W jt þ C jkt :Y jkt þ C klt :Z klt ¼ g 1: min or g 1: max ð1Þ
i t j t j k t k l t
" #
XX
Min dkt Dkt ¼ g 2: min or g 2: max ð2Þ
k t
" #
X XX
Min a Qt þ b Bjt ¼ g 3: min or g 3: max ð3Þ
t J t

Subject to :
X it  ait ; 8i ; 8t ð4Þ
X
W jt  et ; 8t ð5Þ
j
X
Y jkt  bjt ; 8j;t ð6Þ
k
X
Z klt  ckt Dkt ; 8k;t ð7Þ
l

X
I X
J X
J
X it þ Q ðt1Þ  Bjðt1Þ  W jt  Q t P 0 8t ð8Þ
i¼1 j¼1 j¼1

X
K
W jt  - Y jkt ¼ 0; 8j ; 8t ð9Þ
k¼1

X
J X
L
Y jkt  Z klt P 0; 8k ; 8t ð10Þ
j¼1 l¼1

X
K
Z klt P dlt ; 8l ; 8t ð11Þ
k¼1

Q t P Q s; 8t ð12Þ
Q t  et ; 8t ð13Þ
Q 0 ¼ Si ð14Þ
X
K
Dkt  A 8t ð15Þ
k¼1

X it ; W jt ; Y jkt ; Z klt P 0; 8i;j;k;l;t ð16Þ

Dkt ¼ f0; 1g 8k ; 8t ð17Þ
 T. Paksoy, C.-T. Chang / Applied Mathematical Modelling 34 (2010) 3586–3598 3593

4.4. Objective functions

The first objective (Eq. (1)) minimizes the sum of transportation costs in the four stages; the second objective (Eq. (2)) min-
imizes setup costs of popup stores, and the third objective (Eq. (3)) minimizes the total inventory holding and backordering costs.

4.5. Constraints

The first constraints (Eq. (4) restrict the capacity of suppliers to a certain amount (ton/year, unit/year etc.) in period t. Eq.
(5) restrict the capacity of warehouse to a certain amount (ton/year, unit/year etc.) in period t.
Eq. (6) restricts the production capacity of plants to a certain amount (package/year, unit/year etc.) in period t and ensures
that the number of units produced by a plant in period t cannot exceed its existent capacity in period t.
Eq. (7) restricts the capacity of popup stores to a certain amount (package/year, unit/year etc.) in period t and ensures that
the number of units distributed by a popup store in period t cannot exceed its existent capacity in period t.
Eq. (8) ensures that the total amount of materials which is transported in tth period from suppliers to warehouse and
warehouse stock of (t  1)th period should be greater than or equal to the total transported amount in tth period from ware-
house to plants that is able to satisfy the demand of tth period and the backordered amount in tth period and warehouse
stock of tth period. These constraints set up a balance between the total incoming and outgoing items, to and from the ware-
house, in each period.
Eq. (9) guarantees that the total amount of materials which is transported from warehouse to plants in period t should be
equal to the product quantity with multiplication - which is transported from plants to popup stores in period t.
Eq. (10) represents the harmony of production-distribution flows between plants and popup stores. The number of units
distributed by popup store k in period t should be equivalent to the sum of units transported from all plants to that popup
store in period t.
Eq. (11) states that the sum of units distributed from all popup stores to customer zone l in period t should be equal to
that customer zone’s demand in period t.
Eqs. (12) and (13) ensure that the total inventory level in warehouse in each period should be between ‘‘greater than or
equal to safety stock”, and ‘‘less than or equal to warehouse capacity”.
Eq. (14) gives the starting inventory level.
Eq. (15) restricts the number of popup stores to be opened to a certain number (A). Eq. (16) assures that all variables (ex-
cept for Dkt) to take non-negative continues values.
Eq. (17) ensures that Dkt to take only binary variables (0–1).

4.6. Comparison of the proposed model with other models

In order to clarify the differences between the proposed model and the others in the literature, a comparison table is pre-
sented above (Table 1). As can be seen in Table 1, several advantages of using the proposed are found as follows. (1) it allows
decision maker to set multi-aspiration level corresponding to real world situations, (2) it can be easily solved using common
linear programming packages, and (3) the resource constraints can be easily added to suit real conditions.

5. An illustrative example

Here, we use an edible-vegetable oils manufacturer firm (hereafter we will use ‘‘OMC”) operating in Turkey as a real-
world industrial case to demonstrate how the proposed model works. OMC started food trading activities in 1950s and ini-
tiated the foundation of vegetable oil production facilities in 1989. OMC’s manufacturing plant is capable of processing all
kinds of vegetable oils like; sunflower oil, olive oil, corn oil, soybean oil, canola oil, cotton oil, hazelnut oil, vegetable oil blend
etc. And now, OMC is the Turkey’s first edible oil manufacturer certified to ISO 22000:2005, TS-EN-ISO 14001, TS-EN-ISO
17025, ISO-OHSAS 18001, BRC FOOD & TS-EN-ISO 9001:2000 and HACCP system.
Vegetable oil industry is a primary sub industry of the comestible industry. There are a lot of liquid vegetable oil producer
in Turkey. In this sector there are about 150 liquid vegetable oil producers. And also, there are a lot of filling firms that buy oil
in tankers and fill them into packages by using old and primitive methods. Thus, there are plenty of firms and generally firms
are small scaled in this sector. In other words, because of uncontrolled production, low profit margin levels and unfair com-
petition environment; the capacity usage levels are low and the mode of competition is cost based.
OMC wants to develop a distribution network strategy for the south-east region of Turkey. There is a clear difference in
economic development between western and eastern parts of Turkey. Because of the relatively poor developed economic
structure of the south-east region, the prevailing cost based competition is more intractable than other regions of Turkey.
Consequently, OMC decide to apply GM by opening popup stores in this region. In the marketing strategy of popup stores,
the duration is just long enough to take interest and get market opportunities, but not too long to become established. So,
OMC wants to determine a production/distribution plan includes the choice of the popup stores to be opened and the dis-
tribution network design to satisfy the demand. Here below, the transportation costs between the echelons of the supply
chain network are given in Tables 2–5.
3594 T. Paksoy, C.-T. Chang / Applied Mathematical Modelling 34 (2010) 3586–3598

Table 2
Unit cost of transportation from supplier i to warehouse in period t (Cit).

Suppliers Warehouse (Konya) periods

1 2 3 4
1 (Ankara) 46 50 55 60
2 (Istanbul) 55 59 66 71
3 (Izmir) 48 52 56 63

Table 3
Unit cost of transportation from warehouse to plant j in period t (Cjt).

Plant (Adana)
Periods 1
Warehouse (Konya) 1 60
2 63
3 64
4 66

Table 4
Unit cost of transportation from plant j to POPUP k in period t (Cjkt).

Plant (Adana) Popup stores

Periods 1 (Antep) 2 (Urfa) 3 (D. Bakir) 4 (Van)
1 1 41 43 40 44
2 44 45 41 46
3 45 47 43 48
4 46 49 44 50

Table 5
Unit cost of distribution from POPUP k to customer zone l in period t (C klt Þ.

Popup stores Customers

Periods 1 (Kilis) 2 (Mardin) 3 (Bitlis) 4 (Siirt) 5 (Elazig)
1 1 40 50 60 73 62
2 44 55 66 79 68
3 48 60 72 88 76
4 49 63 75 90 79
2 1 60 30 51 40 70
2 67 33 56 44 80
3 72 36 60 49 91
4 75 45 64 53 93
3 1 50 70 30 60 30
2 57 77 33 66 33
3 60 84 36 72 36
4 62 86 37 75 40
4 1 81 60 40 20 84
2 83 66 44 22 90
3 85 73 48 24 93
4 90 76 50 27 95

Because of a new strategic decision of OMC to enter south-east region, OMC determined three different objectives (min-
imizes the sum of transportation costs in the four stages; setup costs of popup stores, and the total inventory holding and
backordering costs). It is common that small organizations and enterprises are able to obtain publicity more easily than large
companies as they are closer to their customers and considerably more agile. OMC applies popup stores as small to be closer
with customers via GM strategy. GM and popup stores involves unusual approaches such as intercept encounters in public
places, street giveaways of products, any unconventional marketing intended to get maximum results from minimal re-
sources. From that point the goals of OMC, popup stores and RMCGM method are overlapped.

5.1. Definition

The rest of the relevant data, some of which is distorted because of the privacy policy of OMC, include following (Tables 6–
11):
 T. Paksoy, C.-T. Chang / Applied Mathematical Modelling 34 (2010) 3586–3598 3595

Table 6
Capacity limits of suppliers (ait).

Periods Suppliers
1 (Ankara) 2 (Istanbul) 3 (Izmir)
1 50 45 35
2 60 50 40
3 50 50 45
4 60 60 50

Table 7
Capacity limits of plants (bjt).

Periods Plant
1 (Adana)
1 160
2 165
3 170
4 180

Table 8
Capacity limits of popup stores (ckt).

Periods Popup stores

1 (Antep) 2 (Urfa) 3 (D. Bakir) 4 (Van)
1 80 90 100 105
2 85 90 100 100
3 90 95 100 110
4 90 95 105 105

Table 9
Demands (dlt).

Periods Customers
1 (Kilis) 2 (Mardin) 3 (Bitlis) 4 (Siirt) 5 (Elazig)
1 23 29 26 33 27
2 25 31 30 35 32
3 28 34 33 38 33
4 29 35 35 40 33

Table 10
Capacity limits of warehouse (et).

Periods Warehouse (Konya)

1 155
2 160
3 175
4 175

Table 11
Set up costs of popup stores (dkt).

Periods Popup stores

1 (Antep) 2 (Urfa) 3 (D. Bakir) 4 (Van)
1 16.390 15.500 17.100 12.000
2 17.000 16.100 17.700 12.200
3 17.200 16.550 18.070 12.520
4 17.450 16.900 18.190 12.770
3596 T. Paksoy, C.-T. Chang / Applied Mathematical Modelling 34 (2010) 3586–3598

Number of suppliers: 3 Number of plants: 1 Number of popup stores: 4

Number of customers: 5 Number of periods: 4 (months) x = 1 (unit/unit)
A=3 a = 40 (USD/unit) b = 80 (USD/unit)
Qs = 5 (units) Si = 25 (units) wn = 1 (n = 1, 2, 3)
an = 1 (n = 1, 2, 3) g1.min = 130,000; g1.max = 140,000 g2.min = 115,000
g2.max = 125,000 g3.min = 3000; g3.max = 3500

5.2. Solution

The mixed integer linear programming model is applied RMCGP approach and solved using LINDO to obtain the optimal
solutions as given in Table 12.

5.3. Discussion

The solution of the model determines the amounts of flows, which include variables such as Xit, Wjt, Yjkt, Zklt, through all
over the supply chain network to satisfy the demand. Also, the model provides an inventory management strategy and eval-
uates the inventory variables of Qt and Bjt.
Except for the safety stock in the first and second period, inventory levels are found as 12 and 9, respectively. But in the
last two periods just safety stocks are carried and moreover 12 and 14 units are backordered, respectively in these periods.
Additionally, the model determines the choice of the popup stores to be opened. Only two popup stores are opened in
Urfa and Van in first period. Popup stores are opened in the same cities in the second period. But after second period, places
of popup stores change and D. Bakir and Van are chosen as places to settle up popup stores in the third and fourth periods.

Table 12
Production/distribution and inventory management plan for the OMC case.

Item Output solutions

Objectives and Obj1 = 131210, Obj2 = 117350, Obj3 = 3720
þ  þ þ þ   
dn ; dn ; e þ 
n ; en d1 ¼ 0; d2 ¼ 0; d3 ¼ 220; d1 ¼ 0; d2 ¼ 0; d3 ¼ 0
eþ þ þ  
1 ¼ 1210; e2 ¼ 2350; e3 ¼ 500; e1 ¼ 0; e2 ¼ 0; e3 ¼ 0


Dkt D11 = 0, D21 = 1, D31 = 0, D41 = 1, D12 = 0, D22 = 1, D32 = 0, D42 = 1, D13 = 0, D23 = 0, D33 = 1, D43 = 1; D14 = 0, D24 = 0, D34 = 1,
D44 = 1
Xit X11 = 50, X12 = 60, X13 = 50, X14 = 60, X21 = 45, X22 = 50, X23 = 50, X24 = 60, X31 = 35, X32 = 40, X33 = 45, X34 = 50
Wjt W11 = 138, W12 = 153, W13 = 166, W14 = 172
Yjkt Y121 = 79, Y122 = 88, Y133 = 94, Y134 = 97, Y141 = 59, Y142 = 65, Y143 = 72, Y144 =75
Zklt Z211 = 23, Z212 = 25, Z221 = 29, Z222 = 31, Z251 = 27, Z252 = 32, Z313 = 28, Z314 = 29, Z333 = 33, Z334 = 35, Z353 = 33, Z354 = 33,
Z423 = 34, Z424 = 35, Z431 = 26, Z432 = 30, Z441 = 33, Z442 = 35, Z443 = 38, Z444 =40
Qt, Bjt Q1 = 17, Q2 = 14, Q3 = 5, Q4 = 5, B11 = 0, B12 = 0, B13 = 12, B14 = 14

100.00

90.00

80.00
degree of satisfaction

70.00

60.00
goal 1
50.00
goal 2
40.00 goal 3

30.00

20.00

10.00

0.00
1 2 3
aspiration intervals
1: 125000≤y1≤130000 2: 115000≤y1≤120000 3: 95000≤y1≤100000
110000≤y2≤115000 95000≤y2≤105000 80000≤y2≤85000
3000≤y3≤3500 2850≤y3≤3250 2400≤y3≤2500

Fig. 2. Sensitivity by changing aspiration intervals.

 T. Paksoy, C.-T. Chang / Applied Mathematical Modelling 34 (2010) 3586–3598 3597

From the results we realize that first goal and second goal are fully satisfied. Positive deviations attached to first and sec-
þ þ
ond goals ðd1 ; d2 Þ, which indicates the violation of the aspiration intervals ‘‘g1.min 6 y1 6 g1.max”and ‘‘g2.min 6 y2 6 g2.max”,
þ
respectively, are zero. But third goal has a positive value ðd3 ¼ 220Þ over aspiration level 3500 and the solution violate
the aspiration interval g3.min 6 y3 6 g3.max and achieved 94.086%. These initial values of degree of satisfaction are accepted
by the managers of OMC and they decided to go on with the determined goal values and the other model parameters. Addi-
tionally, when we analyze the scenarios of the aspiration interval changes, we see in Fig. 2 that the satisfaction levels change
with the intervals. Consequently, the results show that the use of RMCGP can be easily applied to multi-period, multi-stage
inventory controlled supply chain with popup stores in GM.

6. Conclusions

Effective supply chain network design and optimization provide a competitive advantage to firms and organizations in
today’s highly intractable global business s environment. In this study, design and optimization of strategic production–dis-
tribution problem which consists of choosing popup stores to be opened and determining the optimal physical flow of goods
from supply sources to consumption points is treated. The proposed binary mixed integer programming model includes the
choice of popup stores to be opened and design of network configuration with minimum total cost which involves transpor-
tation costs between all stages, set up costs of popup stores and inventory holding and backordering costs. The proposed
model differs from the other models in the literature by introducing the multi-choice concept and location–allocation prob-
lem with warehousing function together in supply chain design problem. Hence, this study attempts to answer the following
question: How can we solve multi-period and multi-stage supply chain problems with multi-choice of aspiration levels un-
der the design tasks of choosing the popup stores to be opened while minimizing setup costs, and determining the distribu-
tion network strategy which is minimizing transportation costs and inventory costs while satisfying the demand. For
relatively small size problem, we show that our proposed method can search the optimal solution in almost all of the time.
So we believe this method will be an efficient and robust method to solve this kind of multi-stage logistic chain design
problems.
In future, new solution methodology based on tabu search can be developed for the multi-objective SCN design problem,
and the effectiveness of the model according to this solution methodology can be investigated. Additionally, uncertainty of
costs and demands can be considered in the model and new solution methodologies including uncertainty can be developed.
This type of models (knapsack problem) is NP-complete. However, approximate results can easily be obtained for complex
problems by using various simulation techniques or heuristics, such as, simulated annealing, genetic algorithms, etc.

Acknowledgements

Authors would like to thank Editor in Chief Prof. M. Cross and anonymous referees for their valuable contributions.

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