Integrating Sustainability into the Optimization of Fuel Logistics Networks

Sustainable operation of logistics systems is a challenge for companies that import refined petroleum products since a complex network is required to deliver this flammable product to the final customers on a regular basis. The present study aims to provide a systematic approach for optimizing Fuel Logistics Network (FLN) accounting for not only transportation cost but also the processrelated risks and the relevant externalities. A Multi-Objective (M-O) Location-Inventory Problem (LIP) is first developed for the risk-aware optimization of logistics networks. The base model is then extended to a Location-Inventory-Routing Problem (LIRP) by integrating routing decision variables to account for the transportation-related risk and the externalities. An M-O evolutionary algorithm is finally adapted to solve the developed problems. The main contribution of the present study is, therefore, to highlight the non-financial operational factors, including safety, emissions and congestion, which have a direct impact on the sustainability of the fuel sector. The proposed mathematical models are tested in the case of a major Liquefied Petroleum Gas (LPG) company in Korea. The final results indicate that decentralization can noticeably improve sustainability in the logistics network of the case study in terms of the safety level around the network nodes as compared to the current norms. It is also suggested that frequent and small-volume supply of fuel may be a feasible alternative to the full-tank replenishment of auto-gas stations. This can be achieved through consolidation of small-volume shipments into large shipments within a milk run transportation routine, or the use of low capacity trucks. Such a process design is likely to further improve the safety factor around the auto-gas stations.