Analysis of Routing Strategies in Air Transportation Networks for Express Package Delivery Services

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The package delivery industry plays a dominant role in our economy by providing consistent and reliable delivery of a wide range of goods. Shipment Service Providers (SSP) offer a wide range of service levels characterized by varying time windows and modes of operation and follow different network configurations and strategies for their operations. SSP operate vast systems of aircraft, trucks, sorting facilities, equipment and personnel to move packages between customer locations. Due to the high values of the assets involved in terms of aircraft and huge operational cost implications, any small percentage savings could result in the order of savings of millions of dollars for the company. The current research focuses on the Express Package Delivery Problem and the optimization of the air transportation network. SSP must determine which routes to fly, which fleets to assign to those routes and how to assign packages to those aircraft, all in response to demand projections and operational restrictions. The objective is to find the cost minimizing movement of packages from their origins to their destinations given the very tight service windows, and limited aircraft capacity.

In the current research, we formulate the air transportation network as a mixed integer program which minimizes the total operating costs subject to the demand, capacity, time, aircraft and airport constraints. We use this model to study of various operational strategies and their potential cost implications. We consider two main operational strategies: one involving no intermediate stops on pick-up and delivery sides and the other involving one intermediate stop between origin and hub on pick-up side and between hub and destination on delivery side. Under each strategy, we analyze the cost implications under a single hub network configuration and regional hub network configuration. We study the impact of various routing scenarios, various variants and logical combinations of these scenarios which gives a clear understanding of the network structure. We perform an extensive sensitivity analysis to understand the implications of variation in demand, fixed cost of operation, variable cost of operation and bounds on the number of aircraft taking off and landing in the airports.