Determining which Orders to Outsource in the Vehicle Routing Problem with Order Outsourcing

In practice, many package transportation companies lower their costs by hiring outside carriers to serve orders that cannot be served efficiently by their own trucks. The problem which takes the order outsource option into account is the Vehicle Routing Problem with Private Fleet and Common Carrier. In this variant of the Vehicle Routing Problem, orders are either delivered by an outside carrier, the common carrier, which receives an order specific fee or by the own fleet, the private fleet, such that the total costs, which is the sum of the outside carrier costs and the delivery costs of the own fleet, is minimized. This paper analyses and compares several methods that estimate which orders to outsource. Additionally, a comparison is presented on VRP instances, which is, to the best of our knowledge, the first time that this is done. We present a new estimation method which outsourcing decision leads to the lowest costs and it leads to a better estimation of the VRP costs.