The majority of distribution network design problems considered to date have focused on minimizing fixed costs of facility location and transportation costs. Measures of customer satisfaction driven by the operational dynamics such as lead times have seldom been considered. We develop three different network design models for an outbound supply chain considering lead times, location of distribution facilities, choice of transportation mode, and congestion effects. In the first design model, we do not consider any capacity restriction on the number of vehicles delivered through a Vehicle Distribution Center (VDC). In the second model, we analyze the effects of different VDC sizes acceptable for an automotive company to have in its distribution network. In the third design model, we consider congestion time at plants and VDCs explicitly and analyze its impact on the design decisions. We present Lagrangian heuristics that give excellent solution quality in reasonable computational time. Scenario analyses are also conducted on industrial data to observe how the supply chain behaves under different conditions.
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