Hub and Spoke Logistics Network Design for Urban Region with Clustering-Based Approach

TL;DR

This paper presents a multi-stage clustering-based approach for designing an efficient hub-and-spoke logistics network in urban areas, demonstrated through real data from Ho Chi Minh City, enhancing flow distribution and cost efficiency.

Contribution

It introduces a novel multi-stage method combining fuzzy clustering and facility location models for urban logistics network design, tailored to demand sensitivity and city infrastructure.

Findings

The proposed approach reduces transportation costs in urban logistics networks.

The network design demonstrates flexibility in flow distribution.

Computational experiments provide managerial insights for decision-making.

Abstract

This study aims to propose effective modeling and approach for designing a logistics network in the urban area in order to offer an efficient flow distribution network as a competitive strategy in the logistics industry where demand is sensitive to both price and time. A multi-stage approach is introduced to select the number of hubs and allocate spokes to the hubs for flow distribution and hubs' location detection. Specifically, a fuzzy clustering model with the objective function is to minimize the approximate transportation cost is employed, in the next phase is to focus on balancing the demand capacity among the hubs with the help of domain experts, afterward, the facility location vehicle routing problems within the network is introduced. To demonstrate the approach's advantages, an experiment was performed on the designed network and its actual transportation cost for the real operational data in which specific to the Ho Chi Minh city infrastructure conditions. Additionally, we show the flexibility of the designed network in the flow distribution and its computational experiments to develop the managerial insights which contribute to the network design decision-making process.