Hub facility location with fixed costs

Abstract

In thep-hub location model, it is usual to ignore the fixed costs of opening facilities. In contrast, the simple plant location problem includes fixed facility costs and thereby makes thenumber of facilities one of the decision variables. This paper introduces fixed facility costs into a hub location model, thereby making the number of hubs a decision variable. As an initial effort toward solving the hub model with fixed costs, a two-step procedure is devised.Step 1 involves an estimate of a good upper bound on the solution, using heuristics.Step 2 involves the computation of a tight lower bound on the solution; as a by-product, an improvement of the best solution from Step 1 may be found. Computational results are discussed for sample problems.