Centralized Carrier Collaboration Multihub Location Problem for Less-Than-Truckload Industry

Abstract

A centralized carrier collaboration multihub location problem (CCCMLP) for the small to medium-sized less-than-truckload industry is addressed. In the CCCMLP, a central entity (e.g., a third-party logistics firm) seeks a set of collaborative consolidation transshipment hubs to establish a hybrid collaborative hub-and-spoke system that minimizes the total collaborative costs for the set of collaborating carriers. Previous studies focused on addressing the exchange of capacity without considering the location of transfer hubs and the routes that connect them. A carrier has the option either to collaborate or to ship its demand directly without collaborating. The decision depends on the expected profit margin over shipping directly while following a revenue-generating, rate-setting behavior. The CCCMLP was formulated as a variant of the P-hub location problem, which is NP-hard and solved with Lagrangian relaxation. Numerical experiments were conducted to gain insight into the performance of the CCCMLP formulation under various network sizes and numbers of hubs. The results indicate that larger expected profit margins from collaborative carriers applying revenue-generating behavior would increase the likelihood of collaboration by carriers. As the network size increases, the effect of hybrid hub location costs drops.