Optimization of hybrid hub-and-spoke network operation for less-than-truckload freight transportation considering incremental quantity discount

Abstract

This paper presents a mixed integer linear programming model (MILP) for optimizing the hybrid hub-and-spoke network operation for a less-than-truckload transportation service. The model aims to minimize the total operation costs (transportation cost and transfer cost), given the determined demand matrix, truck load capacity, and uncapacitated road transportation. The model also incorporates an incremental quantity discount function to solve the reversal of the total cost and the total demand. The model is applied to a real case of a Chinese transportation company engaged in nationwide freight transportation. The numerical example shows that, with uncapacitated road transportation, the total costs and the total vehicle trips of the hybrid hub-and-spoke network operation are, respectively, 8.0% and 15.3% less than those of the pure hub-and-spoke network operation, and the assumed capacity constraints in an extension model result in more target costs on the hybrid hub-and-spoke network. The two models can be used to support the decision making in network operations by transportation and logistics companies.