Location, transshipment and routing: An adaptive transportation network integrating long-haul and local vehicle routing

The routing of commodities is a tactical problem in supply chain management that aims to synchronise transportation services connecting a network of warehouses and consolidation locations. This paper considers the routing of commodities in a transportation network that is flexible in response to demand through changes to regional warehouse clustering and the designation of consolidation locations. Traditionally, warehouse clustering and consolidation locations are determined as part of strategic planning that is performed months to years in advance of operations—limiting the flexibility in transportation networks to respond to changes in demand. A mathematical programming-based algorithmic framework is proposed to integrate the strategic decisions of location planning with tactical decisions of vehicle routing and synchronisation. A multi-armed bandit problem is developed to explore warehouse clustering decisions and exploit those that lead to small transportation costs. An extensive computational study will show that the proposed algorithmic framework effectively integrates strategic and tactical planning decisions to reduce the overall transportation costs.