Quantity and Location Decision of Fresh Food Distribution Centers for a Supermarket Chain under Carbon Policies

Abstract

Supermarket chains handle frequent deliveries of fresh food to the stores, which have led to the non-ignorable high transportation cost. Then a question arises that is it possible to reduce cost by establishing more refrigerated distribution centers (DC)? To answer this question, on basis of data from a large supermarket chain in China, we analyze the decision making process to construct new sub DCs. A balance of the DC cost and the transportation cost is achieved to gain the optimal number and location of sub DCs. We also extend the model to situations with carbon policies (carbon tax policy and carbon cap-and-trade policy). The locations of sub DCs remain the same under carbon policies. Furthermore, a carbon tax policy does not change the number of sub DCs and only causes an increase in the total cost. Under a carbon cap-and-trade policy the optimal decision of the DC number is dependent on the carbon selling rule.