A two‐stage method for the shipper lane selection problem with time windows in transportation service procurement

Abstract

AbstractThe shipper lane selection problem (SLSP) is determining which lanes are to be served by the shipper's vehicle fleet or outsourced to the carriers through auction. While the SLSP in previous studies assumes that each lane is associated with a set of discrete times at which it can be served, this study considers a generalized version assuming a lane service time window for each lane, which is named the SLSP with time windows (SLSPTW). The SLSPTW is formulated as a mixed integer linear programming model that minimizes the sum of the transportation and the service/setup costs incurred by the shipper to auction off the lanes served by the carriers. In the proposed two‐stage solution approach, the first stage is designed to generate quickly a set of possible solutions, the best of which is then verified by a decomposed model of the SLSPTW at the second stage. Besides, an iterative‐improvement mechanism for the proposed algorithm is adopted to achieve the efficiency of the solution quality improvement. The effectiveness and efficiency of the developed solution method is demonstrated by the conducted numerical experiments.