Given a set of basic areas, the territory design problem asks to create a
predefined number of territories, each containing at least one basic area, such
that an objective function is optimized. Desired properties of territories
often include a reasonable balance, compact form, contiguity and small average
journey times which are usually encoded in the objective function or formulated
as constraints. We address the territory design problem by developing graph
theoretic models that also consider the underlying road network. The derived
graph models enable us to tackle the territory design problem by modifying
graph partitioning algorithms and mixed integer programming formulations so
that the objective of the planning problem is taken into account. We test and
compare the algorithms on several real world instances