Network design with consideration of hours-of-service regulation and drop-and-swap trailer operations

This research, motivated by collaboration with a leading manufacturer and distributor of building products, introduces two distribution network design models considering federally mandated hours of service restrictions on truck drivers and drop-and-swap trailer operations. A key feature of the drop-and-swap transport mode is the decoupling of linehaul and last-mile delivery operations, which enables geographic extension of last-mile delivery routes while complying with hours of service driver regulations and providing next-day delivery service. The models simultaneously determine the profit-maximizing size, number, and location of order fulfillment facilities and satellite drop-and-swap terminals, and systemwide transportation flows. A case study of the firm's distribution network reveals that the new location models improve profitability by approximately 5% when compared with traditional network design approaches. An experimental study of five marketing and operational characteristics shows when the models are most advantageously applied. Overall, profit improvements range from 2.32% to 10.97% on a set of 288 test problems. The research provides new insights for integrated facility location and transportation strategic design. The potential application of the models in a variety of e-commerce scenarios is promising.