Extensions to the hub location problem: Formulations and numerical examples

Abstract

Although a tremendous amount of analytical research is being conducted on the hub location problem, few models exist that extend the number of characteristics found in actual hub-and-spoke networks. Four extensions are presented in this paper: (1) a capacitated network model: (2) a minimum threshold model: (3) a model that endogenously determines the number of open hubs for the network; and (4) a model that incorporates a flow-dependent cost function for the spokes as well as the interhub links. Both the capacitated and the minimum threshold models drop the assumption of a completely interconnected network commonly found in hub location models. Numerical results show that total network costs are often minimized by closing a few interhub links. The third extension is the first known hub location model to determine the optimal number of hubs based on the needs of the network. In this model, the number of open hubs depends on the distribution of flows in the network and how cost effectively the flows can be moved across the network. Previous models that endogenously determined the number of open hubs utilized a fixed cost for establishing each hub in order to limit the number of hubs in the network. The final extension recognizes the potential of all links to amalgamate flows and includes a separate flow-dependent cost function for the spokes in addition to the one for the interhub links. Numerical results are shown for all four models.