Robust Strategic Route Planning in Logistics

Logistics is a cost sensitive industry with large and fast growing routing networks. In this paper we devise a computational, robust optimization method for the strategic routing decisions of a logistics’ customer, i.e., a company that uses the services of different freight forwarders to meet its transportation demands between several sources, sinks, and hubs. The costs of such transports are determined by tariff systems that typically show economies of scale and reward the consolidation of goods that complement each other in properties relevant for transport, such as weight and volume. In the strategic planning phase, routes and hubs have to be chosen roughly one year ahead, in particular, before the actual demand is known. Our method anticipates the fluctuation of demands by minimizing the worst-case cost over a restricted scenario set. The combination of a realistic cost function, a robust modeling of uncertainty, and large-scale networks leads to highly intractable models. We show that the correspondi...