Optimizing City Logistics: Analyzing the Benefits of a City Hub and Integrated Inventory Routing Decisions

Abstract

City logistics has gained increasing attention in recent years due to the challenges posed by the rapid growth of urban areas, rising customer expectations, and the need for more sustainable transportation solutions. This study contributes to the field of city logistics by investigating critical aspects related to inventory management and routing decisions, exploring new opportunities, and proposing innovative solutions. Through a comprehensive review of existing literature, this study identifies research opportunities that have the potential to enhance the efficiency and sustainability of urban logistics systems. Based on the research opportunities and directions for future research observed in city logistics literature, the main goal of this thesis is to study how urban logistics operations can benefit from the use of an urban consolidation center or a city hub in a B2B setting. The study is structured into two main parts. The first part investigates the benefits of implementing a city hub in urban distribution networks, comparing scenarios with and without a city hub. The study introduces a multi-period optimization model considering factors like heterogeneous vehicles, strict time windows, and the multitrip setting. It explores the potential cost reductions and operational improvements achievable through a city hub in urban logistics. Through extensive numerical experiments and statistical analysis, we investigate the impact of the problem context, including the number of urban retailers, suppliers, holding cost, and inventory policy, on the distribution decisions and the savings generated by introducing a city hub. Results indicate that, under the assumptions made in this study, the introduction of such a city hub leads to significant reductions in operational costs and demonstrates positive implications on societal impacts (e.g., loading degree, number of urban trips, and traveled distances). Moreover, using a heterogeneous vehicle fleet may also benefit the system, especially in reducing external or environmental costs and the number of van trips in the city. The second part of the study explores the integration of inventory and routing decisions in a two-echelon urban distribution system. The study compares traditional sequential decision-making with an integrated approach, where both decisions are made simultaneously. A matheuristic algorithm is proposed to address the complexity of integrating inventory and routing decisions. This integrated approach consistently outperforms the traditional sequential approach in terms of costs, logistics ratio, number of urban trips, loading degree, and distance traveled. The study’s sensitivity analysis reveals critical factors influencing the implementation of integrated decisions, such as retailer storage capacity, order cost, and retailer participation. In conclusion, this study advances the understanding of urban logistics by examining inventory and routing aspects and proposing innovative solutions. The findings highlight the importance of collaboration, integration, and effective decision-making in enhancing the efficiency, sustainability, and overall performance of urban logistics systems. The research opens up the paths for future exploration, including optimizing the entire supply chain, handling multi-objective models, analyzing time-based access restriction and off-hours deliveries, exploring recent technological advancements in cargo bikes, managing uncertainty, and studying logistics systems with multiple hubs.