Metaheuristic for Hub-Spoke Facility Location Problem: Application to Indian E-commerce Industry

TL;DR

This paper presents a genetic algorithm-based approach to optimize hub locations in India's e-commerce logistics network, reducing total costs and improving delivery time adherence amidst rising customer expectations.

Contribution

It introduces a novel metaheuristic method tailored for the hub-spoke facility location problem in the Indian e-commerce context, incorporating business constraints to enhance efficiency.

Findings

9.73% improvement in TAT compliance

Reduced solution search space and time

Effective cost and time optimization

Abstract

Indian e-commerce industry has evolved over the last decade and is expected to grow over the next few years. The focus has now shifted to turnaround time (TAT) due to the emergence of many third-party logistics providers and higher customer expectations. The key consideration for delivery providers is to balance their overall operating costs while meeting the promised TAT to their customers. E-commerce delivery partners operate through a network of facilities whose strategic locations help to run the operations efficiently. In this work, we identify the locations of hubs throughout the country and their corresponding mapping with the distribution centers. The objective is to minimize the total network costs with TAT adherence. We use Genetic Algorithm and leverage business constraints to reduce the solution search space and hence the solution time. The results indicate an improvement of 9.73% in TAT compliance compared with the current scenario.