An Auction Bidding Approach to Balance Performance Bonuses in Vehicle Routing Problems with Time Windows

Abstract

In the field of operations research, the vehicle routing problem with time windows (VRPTW) has been widely studied because it is extensively used in practical applications. Real-life situations discussed in the relevant research include time windows and vehicle capabilities. Among the constraints in a VRPTW, the practical consideration of the fairness of drivers’ performance bonuses has seldom been discussed in the literature. However, the shortest routes and balanced performance bonuses for all sales drivers are usually in conflict. To balance the bonuses awarded to all drivers, an auction bidding approach was developed to address this practical consideration. The fairness of performance bonuses was considered in the proposed mathematical model. The nearest urgent candidate heuristic used in the auction bidding approach determined the auction price of the sales drivers. The proposed algorithm both achieved a performance bonus balance and planned the shortest route for each driver. To evaluate the performance of the auction bidding approach, several test instances were generated based on VRPTW benchmark data instances. This study also involved sensitivity and scenario analyses to assess the effect of the algorithm’s parameters on the solutions. The results show that the proposed approach efficiently obtained the optimal routes and satisfied the practical concerns in the VRPTW.