A Case Study for a Location-Routing Problem

In contrast to the classical location-allocation models, the location-routing problem (LRP) integrates vehicle routing and scheduling aspects in the location planning process. A survey and classification scheme of location-routing is e.g. proposed by [3] and [2]. This paper presents a LRP of a company which distributes finished cars. This LRP is decomposed into two steps. In the first step a set of candidate depots is determined by minimizing the sum of the radial distances between depots and customers. Based on the locations found in the first step the vehicle routing problem is used to select the depot with the most attractive location in the second step. This paper is organized as follows. In the following the problem is discussed followed by a solution approach in Section 2. The computational results are presented in Section 3. Finally, the main conclusions of the study are drawn in Section 4. The core business of the considered company is the transportation of finished vehicles from automotive factories to car dealers in different regions of Germany. The company’s distribution network is structured as a Hub&Spoke network with each hub serving the customers within a defined region. This paper focuses on the interregional transportation of cars which will be necessary if a car dealer from one region demands cars of the type which are produces by an automotive factory in the second region. In the current situation interregional transports have to pass both terminals (see Fig. 1(1)). Hence, this interregional transportation proceeding goes along with unnecessary expense, especially if there exists an unbalanced demand between the observed regions. Due to this imbalance the capacity of trucks returning from the one region to the other region is lower at large and leads to a low degree of capacity utilization. Furthermore this proceeding goes along with negative effects for the truck drivers since they are not able to return to their initial point on the same day.