Hub-and-Spoke Network Design Considering Congestion and Flow-Based Cost Function

Abstract

This paper presents a model for a “hub-and-spoke network design considering congestion and flow-based cost function”. The number of hubs and spokes is unknown, and the objective is to minimize the cost (including the transportation cost, lost demand, and facility setup cost). In the post-pandemic era, it is expected to have government-imposed restrictions on the congestion of airports, as a measure of health and safety. Unlike the current literature which considers a monetary penalty for congestion, we consider congestion as an externally imposed factor, which should be modeled as a constraint. We take a gravity-based modeling approach to obtain the desirability of a facility and calculate the demand matrix of the network. To solve the model, a Benders decomposition approach is proposed. Without the Benders decomposition approach, only instances with up to ten nodes were solved within a reasonable time, but with the Benders decomposition approach, instances with up to forty nodes were solved. A heuristic algorithm is developed to have a mechanism for dealing with larger instances. A set of experiments are conducted using data from the Turkish Network dataset to study various aspects of the proposed formulation and different parameters’ effects on the performance of the model.