Integrated strategic and tactical design of multi-echelon city distribution systems with vehicles synchronization: A case of the Greater Montréal area

Abstract

The sharp increase in e-commerce volume drives the explosive demand growth for urban parcel delivery. Consequently, more and more logistics service providers (LSP) are moving toward establishing more distribution centres in customers' vicinity within metropolitan areas to ensure fast deliveries to online shoppers and reduce costs. Such LSP seeks to optimize the design of their multi-echelon distribution systems by finding the best satellite locations and vehicle routing solutions. However, since satellites have limited parking and no storage spaces, synchronizing the vehicles' arrival times at these facilities and minimizing their waiting times to be loaded/unloaded are essential in designing multi-echelon distribution systems. This study proposes a new Two Echelons Location Routing problem (2E-LRP) model that incorporates vehicles' temporal synchronization at satellites through minimization and setting of a maximum duration to the second echelon vehicle's waiting times, which had not until now been dealt with in 2E-LRP literature. The 2E-LRP new extension is called Two-Echelon Capacitated Location Routing Problem with Vehicles Synchronization (2E-CLRPVS), and the Binary Variable Fixing (BVF) method is proposed to solve it. To assess the validity and applicability of the 2E-CLRPVS model and the efficiency and robustness of the proposed solving method, we conducted computational experiments for a network with up to 99 customers and 5 five satellites based on data from the Great Montreal area in Canada. We also conducted an extensive sensitivity analysis of some critical parameters of the problem to provide some interesting managerial insights regarding multi-echelon urban distribution network design decision-making.