Compromised network design model for the strategic alliance of service centers and consolidation terminals in express courier services

A direct shipment via express courier is expected to be an area with huge sales potential in the near future. In Korean market, many domestic companies of various sizes have been fiercely competing to extend their own market share. Currently offering only international delivery services, moreover, foreign companies with a higher level of customer services are expected to escalate the competition by entering the market of domestic delivery. These competitive rivalry and price pressure have made market conditions tough and margins under severe pressure. To cope with these substantial competition pressures, we propose strategic alliance as an effective solution to the challenges faced by small and medium express courier service companies. An integer programming model for compromised network design and its solution procedure based on maxmin and maxsum criteria are developed respectively. The applicability and efficiency of the proposed model are demonstrated through an illustrative numerical example.