Reliable Fourth Party Logistics Location-Routing Problem under the Risk of Disruptions

Abstract

A smooth operation of the fourth party logistics supply chain network requires the cooperation of multiple distribution centers and third party logistics. Any unexpected disruption caused by a certain distribution center may lead to serious consequences to the whole fourth party logistics supply chain. Therefore, we study the reliable fourth party logistics location-routing problem in the network design considering disruption risk of distribution centers. In addition, to minimize the total cost of the proposed problem, a scenario-based integer programming model is established to locate distribution centers, to select proper third party logistic providers, and to accomplish the vehicle routing from distribution centers to customers. Then, a two-level heuristic framework is proposed to handle this NP-hard problem through dividing the original problem into two sub-problems. One is the reliable fourth party logistics location assignment problem, and the other is the fourth party logistics vehicle routing problem. These two sub-problems can be independently solved and iteratively composed to get to the solution of the original problem. Furthermore, numerical experiments are designed, and the effectiveness of the heuristic framework is tested by comparing the quality of solutions and running time with those calculated by using CPLEX. Managerial insights are also provided based on the calculation results.