Designing Service System Networks With Interruption Risks

This paper incorporates interruption risk into designing the network of an immobile service system. The service system consists of service facilities, each serving a set of allocated demand locations. The open facilities may be interrupted randomly because of a variety of facility-induced risk factors. The goal is to determine which service facilities are established, what service capacities are selected at open facilities, and how to assign the customers to the open facilities in order to maximize the system's overall performance. The problem is formulated as an integer nonlinear programming model and solved by a Lagrangian relaxation algorithm. The numerical experiments illustrate the high performance of the algorithm in large scales. Several managerial implications are also presented to show the effects of service interruption risks.