Tactical and operational planning of express intra-city package services

In this paper, we focus on routing and load planning associated with the tactical and operational planning of an express intra-city courier service provider that receives a large number of shipments on a daily basis and is committed to delivering them to their destinations given a short service guarantee. Tactical planning relies on high-level aggregated demand rates over long time periods and takes the form of a multi-commodity service network design where the goal is to identify one path per commodity while maximizing consolidation opportunities in the network. Commodities are transported on their paths by means of a series of continuously operating vehicle cycles, where the structure and number of such cycles are determined concurrently with commodity path assignment decisions in a mixed integer programming. A second model is designed to refine the time allocation along different segments of a commodity path allowing a potential reduction in the number of vehicles required to meet the service guarantee. In operational planning, the focus is narrowed down to a shorter time period, and the baseline plan obtained from the tactical planning phase is adjusted to better fit potential deviations in observed demand patterns compared to the aggregate patterns. Through an extensive computational study designed on the topology of a major US city, we observe that the plans designed at the tactical level guarantee high service levels, which are improved at the operational level by customizing the plan to the special characteristic of a day of operation.