Locating Urban Consolidation Centers under Shipper Rationality

Abstract

An urban consolidation center (UCC) is a logistics facility used to combine deliveries of multiple shippers for reducing freight traffic in dense urban areas. Despite their benefits, such as reducing less-than-truckload deliveries, former applications of UUCs have faced backlash from shippers that were forced to use them even though they did not experience any cost savings. Such failures are often due to an unsuitable location of the UCC and the additional costs of facility operation and maintenance that are unfairly divided between the shippers. This paper introduces shipper rationality to measure the willingness of shippers to use an optimally located UCC. We use a continuum approximation approach to derive the routing costs of the shippers as closed-form expressions. We present three objective functions depending on the preference of the regulatory agency that chooses the location of the UCC, allowing rational shippers to join only if they experience cost savings from the UCC. We discuss influential factors in the optimal location of a UCC, including the customer density of each shipper, the establishment cost of the UCC, and the location of each shipper’s fulfillment center.