Reading Aurea’s entry from March, 1st about facility location I immediately had to think about my last project at the German university where I’m studying. Together with a big German parcel company we were looking for heuristics to solve the hub location problem. The hub location problem can be seen as an extension of the facility location problem incorporating network design aspects. Hub location problems consist of two components, the location of hub facilities as well as the allocation of customer nodes to these hubs. Hubs are facilities that serve as consolidation and switching points. Using a hub and spoke network instead of a point to point network reduces the number of routes needed and can help to achieve full truck loads.
One thing that is very important in this context is that location and allocation have to be optimized simultaneously as they affect one another. These interdependencies as well as the size of many hub location problems make an exact mathematical solution quite difficult. Therefore heuristics are often used. Heuristic methods have the advantage that they are rather simple to implement but the problem is that they don’t guarantee an optimal solution. In our project we used the modeling software AIMMS which is just one software of many that is used in the field of mathematical optimization and decision support. As the project was really complex and mathematical I don’t want to go into more detail at this point. Instead I’m going to use the example of the parcel company to explain how hubs work and how they affect network design which was a subject of our logistic class.
A recent example is the DHL Hub in Leipzig which was just opened in 2008 and is one of the most modern airfreight logistic centers. The location in central Germany was chosen as it can be seen as “the heart of Europe” which allows to link Europe with the major markets in America and Asia. Besides the good air link (there are no restrictions on nighttime flights which allows the airplanes to come in at any time) the location is also well connected to rail and roads. It is located at the Berlin – Munich and Dresden – Magdeburg highway junction which allows a fast transportation to nearly all parts of Germany. DHL serves destinations in more than 220 countries around the world. Given this huge size of network direct connections between every site are neither economically reasonable nor possible.
Major hubs like Leipzig allow to re-sort and consolidate the packets. Packets from all over the world arrive in Leipzig to be distributed to other German or European cities (blue arrows). The other way around packets from Germany and Central Europe are collected in Leipzig from where they are spread out into the world (red arrows).
If you are interested in this topic you can watch this video (I consider minutes 1:17 till 4:51 the most important):
Or if you prefer reading and like more information I found another article about the Leipzig Hub: http://www.dpdhl.com/content/dam/dpdhl/logistik_populaer/leipzig_hub/hub-leipzig_en.pdf