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Simulating long-term performance of regional distribution centers in archipelagic logistics systems

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Maritime Economics & Logistics Aims and scope

Abstract

Indonesia has reevaluated its archipelagic logistics system to implement a strategic shift from a point-to-point network to a hub-and-spoke network, with a plan to establish seven new regional distribution centers (RDCs). To supplement the previous qualitative assessment of the plan and to potentially justify continuing with its implementation, this paper aims to evaluate the prospective long-term performance of the planned RDCs within a hub-and-spoke (HS) network. The chosen methodology for this analysis is a hybrid of optimization and simulation, using an agent-based modeling and simulation platform that incorporates a geographic information system (GIS) element to provide a realistic geographical context. This constitutes a relatively novel innovation in logistics research. Experiments were developed to estimate the logistics performance of the hub-and-spoke network and planned RDCs, as well as to identify potential problems such as bottlenecks at the RDCs and the relative (in)efficiency of the selected multimodal transport. Transport costs, inventory costs, and the order backlog of RDCs are evaluated based on the average results from 100 replications. Outcomes from the model are validated against empirical data on Indonesia’s logistics costs from the World Bank. Model results indicate that the hub-and-spoke network performs better than the point-to-point network when it comes to transportation costs. Since this is found to be the dominant element of total logistics costs, appropriate modal choice and route optimization are, therefore, critical to reducing logistics costs. The planned RDCs are found to have significant imbalance in their loadings, which is likely to produce bottlenecks. The paper concludes that a planned move to a hub-and spoke system is appropriate and that the planned investment in the RDCs is therefore justified. However, there is a need to streamline the predicted loadings at the RDCs to avoid bottlenecks. Our results suggest that the government should reopen the case and reevaluate the locations and coverage of each RDC. More generically, it is concluded that the application of hybrid optimization and simulation using agent-based modeling and simulation is feasible and the methodological approach adopted herein is generalizable to other archipelagic logistics systems.

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Source Adapted from Ministry of Trade, Republic of Indonesia (2013)

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Acknowledgements

This research is partially funded by the Indonesian Ministry of Research and Technology/National Agency for Research and Innovation and the Indonesian Ministry of Education and Culture under the World Class University Program, managed by Institut Teknologi Bandung. The authors thank the editor and anonymous referees for their valuable comments and suggested improvements.

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Authors and Affiliations

  1. Department of Mechanical and Industrial Engineering, Universitas Gadjah Mada (UGM), Yogyakarta, Indonesia

    Bertha Maya Sopha, Sekar Sakti & Marselina Winda Dwiansarinopa

  2. Department of Industrial and Information Management, National Cheng-Kung University (NCKU), Tainan, Taiwan

    Ari Carisza Graha Prasetia

  3. School of Business, Economics and Law, University of Gothenburg, Gothenburg, Sweden

    Kevin Cullinane

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  1. Bertha Maya Sopha
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Correspondence to Bertha Maya Sopha.

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Sopha, B.M., Sakti, S., Prasetia, A.C.G. et al. Simulating long-term performance of regional distribution centers in archipelagic logistics systems. Marit Econ Logist 23, 697–725 (2021). https://doi.org/10.1057/s41278-020-00166-3

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