Profit Optimization in Express Networks

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Abstract

Parcel delivery companies offer time-guaranteed transportation of parcels, letters and packages, picked up at one customer and delivered at another. The time in which this has to be done depends on the service level that the customer pays for. To transport the parcels, a network is used consisting of facilities and links, where the facilities have either a regional collection and distribution function, or an inter-regional processing function. The market share that a company has depends on the price and service time the company offers the customers in comparison with the offer of competitors in the market. Optimizing the total profit, the total revenue minus the total cost, is an important objective for these companies. The classical approach to this, is to first determine the prices for the different services, which in turn determine the demand, and then to minimize the costs in the network. This project is aimed at finding a solution approach that integrates this process, and in this way finds better quality solutions in a shorter amount of time. The chosen approach uses efficient formulations and a general purpose MILP-solver for relatively easy problems, and a local search algorithm based on local branching for more difficult problems.

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