ofMaccdonis 15GEgnatia S tr, POE 1591, 54006 Th esseioniki. GI"OtlCO Abetre ct : Let G ... (V. E) bo II co n nected graph expressin g 8 distribu ti on network. The elements of D I: \ ' represent demand cen tres, while S I: V contains the candidate su pply centers. T o eac h node Vi E D, we associate u demand d, a nd to each cleme n t v J of S the couple (e J , c). wh en> ('j and c j are th e set up cost and the capac ity of Vj respectively. Furthermore , the distance for every arc (v j • v-) E

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... and the tran sportation cost of th e product unit are given. In this paper an Jgorithm is developed which determines a subset of S in order to sa tisfy the demands wit h 8 minimum distribution cost, so tha t the total set up cost of supply cente rs does not exceed il given bud get .