Operations design for high-velocity intra-city package service

Abstract

This paper presents a network design problem in the context of intra-city courier service in megacities. The considered setting is inspired by the activities of one of the main courier package companies in China. The problem consists of designing a robust yet cost-effective service network to move packages from their origins to their destinations taking into account the committed service levels. The operational network includes two layers; the first layer consists of the network of riders, transporting packages from (to) customer locations to (from) a series of hubs, while the second layer consists of a fleet of shuttles responsible for the inter-hub transfers. In this study, we focus on shuttle activities and develop optimization technology for the design of shuttle services using novel rate-based models to determine packages as well as vehicle routes. To ensure operational simplicity, we build repeatable vehicle routes taking the form of cycles that are executed throughout the day, taking into account capacity and timing requirements. A computational study using data from a large Chinese package company shows that our technology produces a cost-effective service network design for shuttle schedules with excellent on-time performance.