Optimal Number of Hierarchical Facilities with Failures

This article proposes a continuous approximation model for determining the number of hierarchical facilities when lower level facilities are subject to failures. The average distance from customers to the nearest open facility is derived for two types of customer behavior. The optimal number of facilities that minimizes the average distance is then obtained. The analytical expression for the optimal number of facilities demonstrates how the location of facilities, the failure probability, and the customer behavior affect the optimal hierarchy and the average distance. The result shows that introducing the hierarchy can reduce the average distance if the failure probability is small and the penalty for failing to use facilities is large. The model provides a fundamental understanding of the optimal hierarchy and is useful for designing hierarchical facility systems.