Distribution Network Design with Considering Externality

The externality exists in distribution transportation widely with negative impacts on the whole society. However, these negative external costs have hardly been considered in total cost of enterprise operations, which results in that the best solutions of distribution network for enterprises are usually not the best one for the whole society. This article studies the distribution network design with considering externality of transportation, firstly setting up a concept model and secondly putting the experience data to get different networks with different externality rates. The article further analyzes the results of distribution networks with different rates and recognizes that the valuation of externality rate is the key for distribution network design and the external costs should be brought into the social total cost to get the optimal network design.