Hub network design problem with profit optimization for time-definite LTL freight transportation

Time-definite less-than-truckload (LTL) carriers deliver small, time-guaranteed shipments for shippers. We analyze the hub network configuration under cost minimization and profit maximization behaviors. We extend a perfect inelasticity on demand with cost minimization to an elastic demand hub location design with profit maximization. We formulate this problem as a mixed-integer program that is solved using implicit enumeration with an embedded pricing subproblem. The computational results for a carrier's operational network in Taiwan showed that different behaviors result in noticeably different pricing and demand distributions. In addition, profit optimization builds a denser hub network than cost minimization to increase profit.