A Multi-Depot Shipper Lane Selection Problem with Time Windows in Transportation Service Market

Abstract

In the transportation service market, Shippers take the role of auctioneers, facing a problem known as the Shipper Lane Selection Problem (SLSP).  The problem involves carefully evaluating which lanes should be serviced by their vehicle fleets and which should be outsourced to external carriers through auctions.  However, the SLSP has not been applied when a logistics distribution company has multiple depots.  In this study, the multi-depot nature of the problem is incorporated into SLSPTW to become Multi-Depot Shipper Lane Selection Problem with Time Windows (MDSLSPTW).  The mixed integer linear program model developed was aimed at minimizing the total cost of shippers' transportation services expenditure.  The model was implemented using AMPL and solved with CPLEX 22.1.2 to obtain the optimal solution.  The validity of the model has been tested by using a modified instance of Solomon’s data.  From the scenario analysis, it was found that the percentage of lanes auctioned off increases with the cost of self-servicing but decreases with the cost of outsourcing as the fixed setup cost for conducting an auction becomes lower.  The findings of this study provide valuable insights for logistics distribution companies operating multiple depots, offering opportunities to enhance the strategic decision-making processes for the procurement of transportation services.