Planning and optimization of hub-and-spoke transportation networks of cooperative third-party logistics providers

Abstract

Increased competition in the transport market has led to new cooperative arrangements between third-party logistics providers in the form of hub-and-spoke systems. In addition to the design problem, the operative planning task of a hub-and-spoke network is a challenging task for the management of such transportation networks. In particular, the transport management has to decide whether a pure hub-and-spoke system should be realized, where all quantities within the transportation network flow over the hub from or to the depots, or whether a hybrid hub-and-spoke network is preferred in which direct transports also take place. Mathematical models for these operative planning tasks are developed and applied to a real case of an Austrian parcel service provider. While the actual problem is taken from a real parcel service provider the model can also be applied in the general cargo industry. Cost savings of the hybrid hub-and-spoke system are described.