Solution of two-echelon facility location problems by approximation methods

The two-echelon delivery structure is a strategy that can be implemented in urban areas to lower delivery costs by reducing the movement of heavy goods vehicles. In a two-echelon delivery structure, large trucks deliver shipments from a consolidation center to several terminals, where packages are transferred to smaller trucks for last-mile deliveries. This paper formulates a model that solves the two-echelon delivery structure by the use of approximation techniques. Several potential terminal locations and demand areas were identified, and the optimal number and locations of the terminals were examined, as the model evaluated the most costeffective routes between the consolidation center, potential terminals, and demand areas. Downtown Toronto, Ontario, Canada, was chosen as the case study area to assess the model, and a cost analysis of the number and locations of the terminals was performed. The experiments showed that the number and the locations of the terminals were greatly influenced by the opening cost of the terminals and the transportation cost of the delivery trucks. It was also discovered that the likelihood of selection of terminals that were positioned near both the consolidation center and the center of the service area was higher than the likelihood of selection of terminals at any other location.