Capacitated Centralized Carrier Collaboration Multihub Location Problem

Abstract

This study proposes a capacitated centralized carrier collaboration multihub location problem (CAP-CCCMLP) for the small- to medium-sized less-than-truckload industry, with a central entity (e.g., a third-party logistics firm) seeking a set of hybrid collaborative consolidation transshipment hubs to help establish a collaborative hybrid hub-and-spoke network that minimizes the total collaborative costs for the set of collaborating carriers in the system. A mathematical programming formulation is provided for the CAP-CCCMLP and shown to be NP-hard. The model was solved with two-phase tabu search heuristics. Computational runs were conducted to study the efficiency of the tabu search heuristic versus the CPLEX-based solution and the savings obtained through collaboration for different network sizes and maximum number of consolidation hubs. The tabu search heuristic was found to deliver significant computational savings over CPLEX and the optimality gap between the true optimal solution and the tabu search solution was found to be low for most cases. As the expected cost reduction at the shipment level needed to incentivize collaboration decreases, the likelihood that carriers will enter into collaboration increases. If the carriers expect significant cost reductions to enter into a collaborative strategy, the potential savings from the collaboration will decrease.