Network design for maximizing service satisfaction of suppliers and customers under limited budget for industry innovator fourth-party logistics

Abstract Network design plays an essential role in logistics supply chain management. Under fourth-party logistics (4PL), an industry innovator mode helps to balance the service satisfaction of both suppliers and customers. In this study, this “balancing” advantage is investigated, and a novel network is proposed for 4PL platforms. Specifically, a mixed-integer nonlinear programming model is developed to maximize the service satisfaction of both sides under a limited budget, and to determine the locations for transshipment centers (TCs), third-party logistics (3PL) providers between parties, and transport volumes. The service satisfaction is defined according to prospect theory. Considering the NP-hard characteristic of the problem and its complicated objective function, a particle swarm optimization plus (PSO+) algorithm integrating an average adjustment (AA) strategy is introduced for managing complex budget constraints. A series of numerical experiments are conducted to validate the effectiveness and efficiency of the model and algorithm. The results provide strong evidence for certifying the performance of the model, in which both suppliers and customers can achieve their anticipated service levels.