An integrated modeling framework for design of logistics networks with expedited shipment services

• Propose an integrated logistics design method considering planning and operations.
• Incorporate optional expedited transportation services and inventory management.
• Create customized solution approach to efficiently solve this hard problem.
• Draw managerial insights into the utility of using expedited transportation.

This paper studied an integrated logistics network problem that determines optimal supplier locations, assignments of these suppliers to terminal facilities, expedited shipment configurations, and inventory management strategies in an uncertain environment. We studied the problem structure and proposed mathematical models to determine the optimal network design that minimizes the expected total system cost. We developed a customized solution approach based on Lagrangian relaxation that can solve these models efficiently and accurately. Numerical examples are conducted to draw managerial insights into how problem settings and key parameter values affect the optimal design results.