The Two-Echelon Vehicle Routing Problem with Pickups, Deliveries, and Deadlines

Abstract

This paper introduces the Two-Echelon Vehicle Routing Problem with Pickups, Deliveries, and Deadlines (2E-VRP-PDD), an emerging routing variant addressing the operations of logistics companies connecting consumers and suppliers in metropolitan areas. Logistics companies typically organize their logistics in such metropolitan areas} via multiple geographically dispersed two-echelon distribution systems. The 2E-VRP-PDD is the practical problem that needs to be solved within each of such a single two-echelon distribution system, thereby merging first and last-mile logistics operations. Specifically, it integrates the distribution of last-mile parcels from the hub via satellites to the consumers with the collection of first-mile parcels from the suppliers via satellites that return to the hub. Moreover, it considers deadlines before first-mile parcels arrive at the hub, which must be transported further in the network. We solve the 2E-VRP-PDD with a newly developed Adaptive Large Neighborhood Search (ALNS) combined with a post-process integer programming model. Our ALNS provides high-quality solutions on established benchmark instances from the literature. On a new benchmark set for the 2E-VRP-PDD, we find that modifying time restrictions, such as parcel delivery deadlines at the city hub, can lead to an 8.27% cost increase, highlighting the overhead associated with same-day delivery compared to next-day delivery operations. Finally, by analyzing real-life instances containing up to 2150 customers obtained from our industry collaborator in Jakarta, Indonesia, we show that our ALNS can reduce the cost of operations by up to 17.54% compared to current practice.

Keywords: Routing, City Logistics, Two-Echelon Vehicle Routing, Pickup-and-Delivery, Adaptive Large Neighborhood Search