Supply Hub in Industrial Park (SHIP): The value of freight consolidation

Abstract

Industrial parks, characterized as a cluster of enterprises situated in one location to share common resources, have played an indispensible role in boosting regional economic and industrial development. However, further development has been impeded by the shortage of land space, especially for the construction of warehouses. This paper proposes the concept of Supply Hub in Industrial Park (SHIP) as a promising approach addressing this challenge. SHIP is defined as a public provider of warehousing and logistics services for manufacturing enterprises located within an industrial park. The research reported in this paper focuses on evaluating the value of freight consolidation, one of the typical benefits of applying the SHIP approach. Two mathematical models of the supply chain in a typical industrial park are formulated: with and without SHIP. Genetic Algorithm (GA) is applied for solving the two models, and sensitivity experiments are conducted for comparative analysis between the two scenarios. The computational results show that through consolidating shipments, SHIP brings benefits to the whole industrial park. Total cost savings resulted from the application of SHIP would increase with the size of the supply chain, the vehicle capacity, and the rates of fixed transportation costs and holding costs of finished products at manufacturers.