Location routing for small package shippers with subcontracting options

We present a location routing model that considers the requirements of real-world small package shippers. It integrates the choice between self-operating and subcontracting a depot. Furthermore, we consider the relocation costs which occur when established networks are restructured. We present a hybrid heuristic solution method based on simulated annealing for the location phase and variable neighborhood search for the routing. Through extensive numerical studies we show the competitiveness of our solution method on standard benchmarks and analyze the influence of subcontractors on the network design of a small package shipper.