An integrated decision methodology for designing and operating an air-express courier's distribution network

DHL, an international air-express courier, has been operating in Hong Kong for many years. In 1998, the new international airport located at a site considerably distant from the old location opened in Hong Kong (HK). Other airport-related infrastructure facilities have also been developed or are being developed, resulting in major changes in transport structure as well as a shift in customer demand. In this paper a multiyear distribution network is designed for DHL(HK) using an integrated network design methodology, which consists of a macro model and a micro model. The macro model, a mixed 0–1 linear program, determines in an aggregate manner the least-cost distribution network. The micro model, a simulation, evaluates the operational viability and efficacy of the network according to its service coverage and service reliability. We also illustrate how coverage and reliability can be improved via the integrated use of the two models. Extensive discussion on relevant planning and operational issues of an air-express courier are included. The methodology has been successfully implemented at DHL(HK). It has been used to design the network, to test strategic decisions, and to update the network.