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Benders Decomposition for Hub Location Problems with Economies of Scale

Department of Applied and Exact Sciences, Federal University of Ouro Preto, João Monlevade, 35931-026, Minas Gerais, Brazil
Department of Industrial Engineering, Federal University of Minas Gerais, Pampulha, 30161-010, Belo Horizonte, Minas Gerais, Brazil
Computer Sciences Institute, Federal University of Alagoas, Campus A. C. Simões, Tabuleiro dos Martins, 57072-970, Maceió, Alagoas, Brazil
rcamargo{at}decea.ufop.br
miranda{at}dep.ufmg.br
pacca{at}tci.ufal.br

When considering hub-and-spoke networks with multiple allocation, the classical models of the literature compute solutions with large discount factors for small flows on interhub connections. Addressing the economies of scale issue, a tighter formulation for this problem is presented, bringing forward a special structure. A specialized version of Benders decomposition is then developed to solve large instances in reasonable time.

Key Words: hub-and-spoke networks; Benders decomposition; scale economies
History: Received: February 2007; revised: December 2007; accepted: December 2007.