Plant location with minimum inventory

We present an integer programming model for plant location with inventory costs. The linear programming relaxation has been solved by Dantzig–Wolfe decomposition. In this case the subproblems reduce to the minimum cut problem. We have used subgradient optimization to accelerate the convergence of the D–W algorithm. We present our experience with problems arising in the design of a distribution network for computer spare parts. In most cases, from a fractional solution we were able to derive integer solutions within 4% of optimality.