An optimization model for a cross-border logistics problem: A case in Hong Kong

Since the implementation of the open-door policy in China, economic activities between Hong Kong and China have increased dramatically. A major phenomenon of this development is the move of Hong Kong-based manufacturers' production lines to China to take advantage of the lower production cost, lower wages and lower rental costs. However, due to the geographical separation of a border between Hong Kong and China, lorries transporting finished products between China to Hong Kong must pay a cross-boundary fee. In this paper, an optimization model is developed to solve a logistics problem in a Hong Kong-based manufacturing company. The characteristics of similar cross-border logistics problems and the alternatives to transporting products are discussed. To enhance the practical implications of the proposed model, different managerial logistics plans are evaluated according to changes of future policy and situation. The robustness and effectiveness of the developed model are demonstrated by numerical results.