Location-allocation problem in a multi-terminal cross-dock distribution network for palletized perishables delivery

A multi-terminal cross-dock distribution network deals with widespread suppliers through intermediate logistic actors that collect products from supplier facilities and use cross-docking hubs for consolidation and distribution. In these hubs, incoming products are unloaded, sorted, and consolidated with others into new shipments heading towards retailers and final customers. This type of network is suitable for the express delivery of fast-moving products, such as perishables, guaranteeing shipment within a short time window (e.g., one day). The strategic design of a multi-terminal cross-dock network deals with solving the location-allocation problem (LAP) because hub location and flow allocation play a pivotal role in reducing transportation time and cost. This paper proposes a mixed-integer linear programming (MILP) model that solves the strategic problem of a multi-terminal cross-dock network design for perishables in an augmented LAP formulation. The aim is to exploit the potential hub location and handling capacity (i.e., location problem), as well as the optimal destination hub for unloading/loading operations (i.e., allocation problem) per truck, while minimizing the total logistics costs and increasing truck utilization. The proposed model is applied to a cross-dock multi-terminal network owned by an Italian company specializing in the fast delivery of palletized perishable products. A comparative what-if multi-scenario analysis illustrates the change in the traveling cost and truck utilization according to several factors, such as the opportunity to open (close) new (existing) hubs in Italy.