Abstract The paper proposes a Two-Echelon Capacitated Vehicle Routing Problem with Environmental consideration, intended for managing urban freight distribution in City Logistics. It presents a novel Dynamic programming approach that divides the main problem into several ones and uses an exact algorithm to obtain optimal route paths. The approach applies Fuzzy C-Means Clustering for assigning a group of customers to a satellite. The initial solution is improved with roulette selection, 2-opt, and Or-opt exchange heuristics. The approach was tested on benchmark instances, and obtained results are satisfactory. Moreover, the proposed method highlights the environmental improvement we can obtain in managing urban freight transportation
