Running head: THE ECO-FRIENDLY INTERMODAL DELIVERY NETWORK 1 The Eco-Friendly Intermodal Delivery Network Optimization of an mTSP by Using K-Means and a Genetic Algorithm

The design of the distribution process is a strategic issue for almost every company. As the use of advanced technology and automation increases in manufacturing and logistics, the implementation of autonomous and electrical transportation, such as driverless vehicles and electric trucks, has become an interesting topic of study within the last few years, with the main objective of minimizing distribution costs and delivery times. The purpose of this research is to prove that intermodal delivery networks, which may combine a train and several electric vehicles, are more efficient and environmentally friendly than unimodal networks for high volume and long haul transportation, regardless of the customers’ distribution. This is only applicable if demand does not fall within the capacity restriction of road transportation vehicles. To do so, this paper utilizes an optimization algorithm that consists of a feedback mechanism between K-means and a genetic algorithm, which finds the optimal routes between distribution centers and surrounding customers as a multiple traveling salesman problem (mTSP). THE ECO-FRIENDLY INTERMODAL DELIVERY NETWORK 4 The Eco-Friendly Intermodal Delivery Network Currently, logistics is one of the most important areas in business management for almost every company because it covers the management, planning, and delivery of products at the lowest cost. It is an indispensable part of success in business operations as it is a strategic tool for efficient deliveries and the proper functioning and growth of the commercial and marketing departments of many companies. In other words, logistics brings together both supply and sales, and aims to achieve greater efficiency by controlling the flow of customer information, distribution centers, warehouses, and inventory. By doing this, companies intend to minimize response time, optimize storage costs, reduce inventory, and integrate transportation. In order to achieve success in the implementation of an optimal logistics network in an organization, it is necessary to develop certain functionalities in different areas such as evaluation of types of transportation, analysis of productivity and capacity, quality control, demand forecasting, route planning, and map configuration with delivery network. Thus, logistics management in general is one of the basic elements to improve profitability and competitive performance of a company as a whole. Besides finding the optimal design of the distribution that minimizes delivery times and distribution costs, many companies look for systems of transportation that bring other advantages associated with them such as increasing the public’s safety, reducing energy consumption, and contributing to improved air quality and environmental conditions. The choice of a transportation mode, combined or not, depends on factors such as the need for specific infrastructure, serviced distance, transport capacity, safety, weight, and volume constraints, associated costs including equipment THE ECO-FRIENDLY INTERMODAL DELIVERY NETWORK 5 and infrastructure, weather conditions, the urgency and the response time, the enforceable environmental restrictions, saturation of transportation networks, the conditions of the elements that need to be transported, geographic characteristics, and many others. The decision to opt for certain transportation modes or the combination of at least two of them depends on the weights assigned to the different factors and priorities of the decision maker. However, holding paramount the safety, health, and welfare of the public as well as promoting the sustainability of the environment and minimizing delivery times and distribution costs should be the primary objectives for any industrial and systems engineer. Having this in mind, a quick comparison of the different types of transportation available is summarized in Table 1. Table 1: Types of Transportation Comparison (U.S. DOT FHA, 1998) Transportation Comparison Types of Transportation Speed Capacity Safety Costs Type of Merchandise Road High Low Medium Low All Rail Medium High High Medium Bulks and Containers Maritime Low Very High High Low Bulks and Containers Air Very High Low Very High High High value, perishable Intermodal High Medium Medium Medium All On one hand, by looking at the different factors such as speed, capacity, safety, and costs, the road transportation is the best option when it comes to high speed and low costs. However, safety and capacity are very low compared to other transportation modes, which would require a higher number of vehicles in order to meet high demands. Moreover, one of the biggest challenges with the current road transportation is roadway congestion. As stated by Schrank, Eisele, Lomax, and Bak (2015), “the data from 1982 to 2014 show that, short of major economic problems, congestion will continue to increase if projects, programs, and policies are not expanded” (p. 1). In 2014, congestion caused THE ECO-FRIENDLY INTERMODAL DELIVERY NETWORK 6 trucks to lose $28 billion on wasted time and fuel. Also, the Travel Time Index has increased from 1.09 in 1982 to 1.22 in 2014 and the total congestion cost in billions of dollars has increased from $42 in 1982 to $160 in 2014 (Shrank et al., 2015, p. 3). On the other hand, air and maritime transportation would not be ideal due to high costs and low speed, respectively. When it comes to air transportation, new disruptive technologies are rising in the last few years such as the use of drones to deliver light packages to the end-users, which could be an efficient solution for short-distances. However, some of the limitations are the capacity and battery-life as drones can only carry one package at a time, with a maximum weight of 5 lbs. , for less than 30 minutes (Wang, 2015). Finally, rail transportation could be a feasible solution due to high capacity and safety. However, it is not one of the fastest transportation modes and it could only become an optimal choice if combined with at least another transportation mode due to high investments associated with infrastructure and difficulties to find free space in urban areas in order to reach clients or customers. From an economic standpoint, Jean-Paul Rodrigue, Claude Comtois, and Brian Slack (2013) state that “different transportation modes have different cost functions according to the serviced distance. Road, rail, and maritime transport have respectively a T1, T2, and T3 cost functions. ” THE ECO-FRIENDLY INTERMODAL DELIVERY NETWORK 7 Figure 1: Types of Transportation Cost Function As shown in figure 1, road transportation will be more profitable for shorter distances while rail and maritime transportation will minimize distribution costs per unit in medium and larger distances, respectively. The crossover point where road transportation becomes more expensive than rail transportation is roughly located between 500 and 750 km from the departure point. Secondly, the crossover point where rail and road transportation become more expensive than maritime transportation is generally located around 1,500 km (Rodrigue et al., 2013). However, breakeven distances may change depending on market densities, resources available, and specific transportation characteristics of each region. Thus, this research studies, from an operational perspective, the implementation of an intermodal network that will consist of a train and several electric vehicles. Intermodal Network: A Train-EVs in Tandem Delivery System Advanced technology and automation are playing a huge role on the production of autonomous and electric vehicles that could revolutionize the automobile industry and current logistics networks in a few years. Given the projections estimated by Vijay Gill, THE ECO-FRIENDLY INTERMODAL DELIVERY NETWORK 8 Barrie Kirk, Paul Godsmark, and Brian Flemming (2015), the arrival of automated vehicles (AVs), also known as driverless or self-driving vehicles, is the disruptive technology that is not only on the drawing board, but is actually about to operate, or operating, in many countries of the world. For example, Singapore and the government of the United Kingdom are promoting the testing of AVs on their public highways in 2015 while the European Union is expanding on the CityMobil2 program to help develop and introduce AVs in Europe (Gill, Kirk, Godsmark, & Flemming, 2015, p. 7). Moreover, companies such as Mercedes-Benz, Nissan, Peugeot, Volvo and Tesla are moving toward the development of AVs with electric motors. For example, “Mercedes-Benz already has demonstration vehicles capable of 99 per cent autonomous operation and commercially available vehicles that are 70 per cent autonomous” (Gill et al., 2015, p. 7). For now, the speed of these vehicles vary from 25 km/h, which is the speed of a driverless shuttle, to 40 km/h, which is the speed of a fully automated, electric vehicle that Google is likely to start using for deliveries (UK Department of Transport, 2015). Even though the AVs’ average speed is low compared to standard vehicles, this form of transportation will be ideal in urban areas. For high volume and long haul transportation, it is necessary to highlight the development of hybrid-electric trucks (which increase fuel efficiency by combining an electric motor with a conventional combustion engine), battery electric trucks (which have an electric motor powered by batteries), and fuel cell electric trucks (which use fuel cells to convert hydrogen and air into electricity). Currently, companies such as BRUSA, BMW, and Freightliner have already developed electric trucks with capacities varying from 8 tons up to 40. Even though these technologies are still in development due to battery-life limitations, these electric vehicles “have the potential to THE ECO-FRIENDLY INTERMODAL DELIVERY NETWORK 9 dramatically reduce fuel consumption, cutting fuel costs for business, improving air quality and public health, and moving America towards