Impact of dynamic decision making on hub-and-spoke freight transportation networks

Hub-and-spoke freight transportation networks use consolidation as a means to achieve the economies of scale. The operations and rules in such networks are very complex. This paper considers the tactical planning for these networks and the study is driven by the emerging new information technology that allows us to use real-time information to guide decision making. First, we develop a comprehensive simulation system that can capture the relationships between the network configuration, load planning, complicated work rules, trailer-closing policies, day of the week effects, and service commitment. Through the simulation study, we highlight the effects on costs and services if we add the time dimension in the tactical planning and if we change some parameters that govern the trailer closing process. The simulation results suggest that if we can dynamically change the shipment routes and the trailer-closing rules, the service levels can be improved substantially. Based on the results, we further formulate the trailer-closing policy as a dynamic programming model. We consider a framework for developing solution methods and discuss issues and possible research directions under this framework.