Reliable Facility Location Problem with Facility Protection

This paper studies a reliable facility location problem with facility protection that aims to hedge against random facility disruptions by both strategically protecting some facilities and using backup facilities for the demands. An Integer Programming model is proposed for this problem, in which the failure probabilities of facilities are site-specific. A solution approach combining Lagrangian Relaxation and local search is proposed and is demonstrated to be both effective and efficient based on computational experiments on random numerical examples with 49, 88, 150 and 263 nodes in the network. A real case study for a 100-city network in Hunan province, China, is presented, based on which the properties of the model are discussed and some managerial insights are analyzed.