Single Allocation Hub Network Design Model with Consolidated Traffic Flows

Abstract

Economies of scale achieved by consolidating traffic flows are fundamental characteristics of hub networks. In the hub network design problem, then, it is particularly important to quantify cost savings stemming from economies of scale, the operating costs of hub facilities, and the opportunity costs of delays in hub facilities. Because of the NP (nondeterministic polynomial time)-complete nature of the hub network design problem, most previous researchers have focused on the development of heuristic algorithms for approximate solutions. The purpose of this paper is to develop a hub network design model considering economies of scale stemming from consolidation of traffic flows. The model is designed to determine endogenously the cost-decreasing effect resulting from economies of scale and to include several cost components and capacity constraints relative to the particularity of hub networks. The model in this paper is compared with recently published studies using real data. The results of the analysis show that the proposed model can provide a more reliable and realistic representation of real hub networks. This study can not only form the theoretical basis of an effective and rational hub network design but also contribute to the assessment of existing and planned logistics systems.