Design and Operation of Multimode, Multiservice Logistics Systems

This thesis introduces design strategies and operational planning techniques for multimode, multiservice networks for package delivery carriers where service levels are defined by the guaranteed delivery items of packages (e.g., overnight, two-day delivery, etc.). Large-scale transportation network design problems are typically challenging, due to the large number of interdependent decision variables and constraints. These problems are even more complex with multiple service levels. Conventional network design and routing models cannot sufficiently capture the complexity of multimode, multiservice networks. This thesis discusses two principal design and routing approaches employed in the literature, and shows how the two approaches can be integrated. One approach utilizes detailed mixed-integer programming formulations and numerical methods. The other employs less detailed models based on continuous approximations. While the first approach provides a much higher level of detail, the second is more revealing of “the big picture”. Therefore, numerical methods are well suited for operational control, while continuous approximation methods are particularly effective for strategic planning and design, especially under uncertainty. An approach based on the complementary use of analytical approximation models and numerical optimization is developed to design, test and evaluate integrated strategies. This is the first application of hybrid continuous approximation/numerical optimization models to large-scale integrated networks with shipment choice. As such, advancements in both continuous approximation and numerical optimization, and the integration of the two, are required. Continuous approximation cost functions are shown to be capable of realistically modeling complex distribution systems with multiple trans-shipments and peddling tours. This research also demonstrates the application of solution techniques to reduce complex cost models to a series of subproblems that can be solved with common spreadsheet technology. Cost components are shown to accurately model costs using independent cost validation. A variety of integration scenarios are analyzed and the advantages of integrated operations are presented. Qualitative conclusions suggest that benefits of integration are greater when deferred demand exceeds express demand. This insight helps to explain the different business strategies of package delivery firms in industry today. This research demonstrates how hybrid modeling approaches can be used to better understand and better plan operating strategies for distribution companies.