The hub network design problem with stopovers and feeders: The case of Federal Express

This paper introduces a network planning problem called the hub network design problem with stopovers and feeders. Most, if not all, of the recent logistics research on hub-and-spokes networks has assumed that all nodes in the network are connected by direct flights to the hub. However, in the network used by the Federal Express Co., most flights to and from the hub make one or more stopovers, and many smaller cities are served by feeder aircraft which connect to other nonhub cities. This paper explores the tradeoffs and savings involved with stopovers and feeders, and develops a mixed-integer program to design the least-cost single-hub air network assuming that the hub location is already determined. The model is then applied to the western U.S. portion of the Federal Express package collection system. Comparing the optimal results to the pure hub-and-spokes network proves that substantial improvements in cost, miles flown, load factor and number of aircraft can be achieved by using stopovers and feeders in a hub network, and that it is unrealistic to assume a network with only direct flights. Comparision with the actual Federal Express network shows many similarities (which suggest that the model is capturing the important design criteria), and several differences (which indicate the model’s potential for improving efficiency). The usefulness of the model for a company’s comprehensive network planning and for hub location modeling is discussed.