Stochastic single allocation hub location problems with balanced utilization of hub capacities

Abstract

This paper presents a stochastic formulation for capacitated single allocation hub location problems with uncertain demands, in which the balanced utilization of hub capacities is considered in the strategic decision making process. The demands are assumed to be independent random variables with known normal probability distributions. A stochastic programming model with joint chance constraints is established and then transformed into a second-order mixed-integer cone programming model. Furthermore, the proposed model is approximated by using piecewise tangent approximation and piecewise linear approximation techniques. For the approximated models, alternative reformulations are developed, and valid inequalities are employed to add to alternative reformulations. Extensive numerical experiments with CAB and AP data sets are conducted to evaluate the performance of the proposed methods, and analyze the configuration of hub-and-spoke networks and the utilization of hub capacities. Experimental results show that the optimal solution of proposed models can be obtained by using the two approximation techniques with a small number of tangent and linear segments. The developed alternative reformulations and valid inequalities can significantly improve computational efficiency. The entire unbalanced utilization degree of hub capacities can be greatly reduced with a small rise in the traditional operating cost.