An alternative approach to address uncertainty in hub location

Abstract

In this paper, optimization and simulation techniques are integrated to address single and multiple allocation hub network design problems under uncertainty. Using a scenario-based iterative optimization-simulation approach four sources of uncertainty are considered: the demand to be transported within the network, the associated transportation costs as well as the fixed costs for both opening hub facilities and establishing the connections between them. Additionally, flow-dependent economies of scale on all network connections are incorporated in the simulation phase. A value of simulation measure is introduced to evaluate the performance of the methodology. The computational tests conducted on the well-known CAB data set with varying levels of uncertainty show that the approach can result in better solutions with up to 6.6% lower cost compared to its deterministic counterpart.