A genetic algorithm for the problem of configuring a hub-and-spoke network for a LTL trucking company in Brazil

A heuristic based on genetic algorithms is proposed to the problem of configuring hub-and-spoke networks for trucking companies that operate less-than-truckload (LTL) services in Brazil. The problem consists of determining the number of consolidation terminals (also known as hubs), their locations and the assignment of the spokes to the hubs, aiming to minimize the total cost, which is composed of fixed and variable costs. The proposed formulation differs from similar formulations found in the literature in the sense that it allows variable scale-reduction factors for the transportation costs according to the total amount of freight between hub terminals, as occurs to less-than-truckload (LTL) freight carriers in Brazil. Our genetic algorithm approach incorporates an efficient local improvement procedure that is applied to each generated individual of the population. Computational results for benchmark problems are presented. A practical application to a real world problem involving one of the top-ten trucking companies in Brazil is also described.