Reliable Hub Location Model for Air Transportation Networks under Random Disruptions
Manufacturing & Service Operations Management, Forthcoming
43 Pages Posted: 10 Jul 2019
Date Written: July 7, 2019
Problem deﬁnition: In this paper, we study a reliable hub location model, the objective of which is to minimize the associated costs plus the penalty for unserved demands. The model assigns to each origin-destination pair a primary path and a backup path to hedge against the risk of random disruptions. Aside from the ﬁxed costs of locating hubs, the ﬁxed costs incurred by hub-connecting arcs that exhibit economies of scale in transportation are considered.
Academic/Practical Relevance: The widely adopted hub-and-spoke architecture in the network designs can trigger cascading eﬀects during and in the aftermath of disruption events and lead to further losses. By incorporating a general speciﬁcation of disruptions, our model helps ﬁrms improve network reliability while inheriting the beneﬁts of routing via hubs. Therefore, this work extends the literature on hub location problems by considering reliability under disruptions.
Methodology: We present a path-based model and formulate a combinatorial optimization problem. By exploiting the structural properties of the problem, we introduce a tractable mixed-integer linear program reformulation and develop a constraint generation method to accelerate the solution procedure. We further construct two eﬀective heuristics.
Results: We demonstrate the necessity of considering disruptions and the profound beneﬁts of employing backup paths. Moreover, we show via numerical studies that the path-based model delivers eﬃcient and eﬀective reliable hub-and-spoke designs.
Managerial Implications: We ﬁnd that establishing backup paths according to the proposed model barely escalates network costs yet signiﬁcantly enhances service levels and that exploiting disruption correlation helps reduce the expected total cost especially when the underlying disruption correlation is strong. We also discover that the model is suitable in a turbulent environment, in that the decisions on the locations of hubs and hub arcs are relatively robust compared with those on path assignments. We summarize key insights as observations that can be used directly as rules of thumb to guide designs in practice.
Keywords: air transportation network, hub location, disruptions, mixed-integer linear program
Suggested Citation: Suggested Citation