Location and Capacity Planning of Freight Villages: The Case of Türkiye

Abstract

Freight villages are logistics hubs where distribution and storage related activities meet. Determining their locations and capacities is a strategically important yet a difficult problem due to its complex structure. This paper provides a mixed integer linear programming model for identifying the locations, number, and capacities of freight villages. Objective is to set up a distribution network and minimize its total cost. The proposed model is computationally efficient as the optimal solution can be found within minutes. The model is applied using real life data in Turkey. The application includes major container ports as supply points and all cities as demand points, which are also alternative locations for freight villages. Optimal solution provides a plan and a budget to build the required capacity and number of logistics villages dispersed geographically. Sensitivity analysis is also conducted to investigate the system-wide costs and derive insights when there is a limit on the number of freight villages.