Reliable hub-and-spoke network design problem with budget constraint

Hub-and-spoke networks are widely adopted in passenger and freight transportation, distribution systems, postal services, and telecommunications. Overall performance of these networks highly depends on proper functioning of hubs and connecting links. Therefore, considering the reliability of hub-and-spoke networks is a critical issue in design phase of such networks. In this paper, we address the reliable capacitated hub-and-spoke network design problem with budget constraint. Given a limited budget to invest on the design and operation phases of hub-and-spoke network, the objective is to maximize the total reliability of the network which is subject to hub and link failure. A mathematical programming formulation is presented for the problem and the model is solved using a standard optimization package. Some managerial insights are derived based on the computational results.