Network design with consideration of hours‐of‐service regulation and drop‐and‐swap trailer operations

Abstract

AbstractThis research, motivated by collaboration with a leading manufacturer and distributor of building products, introduces two distribution network design models considering federally mandated hours of service restrictions on truck drivers and drop‐and‐swap trailer operations. A key feature of the drop‐and‐swap transport mode is the decoupling of linehaul and last‐mile delivery operations, which enables geographic extension of last‐mile delivery routes while complying with hours of service driver regulations and providing next‐day delivery service. The models simultaneously determine the profit‐maximizing size, number, and location of order fulfillment facilities and satellite drop‐and‐swap terminals, and systemwide transportation flows. A case study of the firm's distribution network reveals that the new location models improve profitability by approximately 5% when compared with traditional network design approaches. An experimental study of five marketing and operational characteristics shows when the models are most advantageously applied. Overall, profit improvements range from 2.32% to 10.97% on a set of 288 test problems. The research provides new insights for integrated facility location and transportation strategic design. The potential application of the models in a variety of e‐commerce scenarios is promising.