Public Logistics Network Cost Analysis

Abstract

A public logistics network (PLN) was proposed as a means to allow multiple firms to cooperate in providing ground parcel transport. To support fast and flexible shipping, a PLN would require sorting in terminals. In this research, we address to find an upper bound on the terminal cost for a PLN system such that its total transport costs would be the same as that of the a private logistics network like UPS. The labor costs in current terminals are high because of lots of human handling [10]. In order to reduce high labor costs and provide efficient sorting capacity, we want to use automatic equipment in the PLN terminals.

Since the biggest parcel delivery company, UPS, is a hub-and-spoke (HUB) transportation system, the total logistics network cost in a PLN should be higher than UPS's. The total logistics network cost includes line-haul transportation cost, pick-up/delivery (P/D) routing cost, and terminal cost. By analyzing each cost in the logistics network, we define an upper bound terminal cost for a PLN based on a similar level of service with HUB. A hypothetical network of 36 terminals in the southeastern U.S. is used as an example PLN in the analysis.

In the example, we observed that transportation cost in a PLN is lower than in a HUB, and the saving transportation cost of PLN contributes to among that can be spent on sorting equipment at the terminals. The upper bound sorting cost for whole hypothetical network is around $5–11 billion for 4–10 years. The average upper bound cost for each terminal is around $163–318 million for 4–10 years. According to the number of sorts need in the hypothetical network, the upper bound sorting cost per truck stop, $91,832–179,289, is offered to determine the size of terminals based on their sorting needs. All these upper bound costs can be used to provide a detailed terminal layout design in the future.