Facility location with yield uncertainty: Model and solution approach

We consider a multi-product capacitated facility location problem with stochastic yields. The objective is to choose location of facilities and to allocate products to the facilities in order to minimize total expected costs. Besides the uncertainty we take large switchover times into account if more than one product is assigned to a facility. We model the problem as a mixed-integer program and develop methods based on Lagrangian relaxation to obtain lower bounds. Furthermore we solve a simpli ed problem by a standard solver and apply an improvement heuristic to obtain feasible solutions.