Multiple Allocation Hub Location Problem with Flow-Dependent Set-up Cost

Reasonable hub location is of great importance to improve efficiency and financial performance of transportation. In this paper, multiple allocation hub location problem considering flow-dependent set-up cost is studied. Unlike the extant literature, set-up cost is assumed to be proportional to the total amount of flows through the hub. An integer linear programming model is developed to minimize transportation costs and set-up costs. Computational tests with the CAB data set are also presented. Meanwhile, the impact of different discount factors on optimal locations is discussed, and the handling strategy when different demands occur is also analyzed. Moreover, the reason why hubs that serve more than one region should be replaced by potential hubs when demands change is analyzed, and useful suggestions are provided for decision makers to design hub network.