Optimization Tools for Logistics

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Fleet Optimization Technologies are Powerful Tools for Improving Supply Chain Performance

SignIn with your Office account. Sauvegarder l'image. Date: pages: ISBN: The book is supported by worked problems and examples from industrial case studies, provi. Covers simple explanations of the mathematical theories related to logistics Contains many problems and examples from industrial case studies Includes coverage of the use of readily available software; spreadsheets, project managers, flows simulators. Similar books. Public Folders 0. Private Folders 0. Courses 0.

Transportation Planning and Logistics Optimization Software Tool

Comments 0. Themes Subjects Tags Comments. At Recreational Gear, however, staff members assigned to the network design project found themselves trying to juggle their regular responsibilities with their added data-gathering tasks. This led to more than a few long days and some weekends in order to complete the data collection phase. As much work as it may be, the data collection effort is nonetheless necessary.

The team needs this information in order to conduct a current-situation audit or create an "as is" baseline representation of the current network. Before any potential changes to the existing network can be analyzed, one must ensure validate that the model replicates the realworld situation. This is the most time-consuming—and often most frustrating—part of the project. But until the project team agrees that the model provides a reasonable representation of reality, it is not advisable to move to the next stage. For Recreational Gear, the current-situation audit resulted in some interesting insights.

As Figure 1 shows, products were being manufactured throughout the United States and Mexico and distributed across the same geography. One might be hauling outbound freight from one plant, while the other could be going the other way with freight from an entirely different plant. The freight on each might be similar products but different brands! Then each might have to deadhead to other plants to pick up additional loads. This map confirmed what the project team suspected: A great deal of efficiency could be gained from optimizing the flow of outbound products.

Optimization: Game On

Making the analysis Once the data-collection phase was complete, it was time to begin the interesting part of the project: the optimization of the baseline to identify immediate savings and benefits. The goal of this phase is to find the "low-hanging fruit," or improvements that could be gained relatively quickly and easily. An example might be incorporating the private fleets left over from acquisitions into the company's centralized transportation network. At the same time, this optimized baseline also indicates how much the current cost exceeds the lowest possible cost.

It has been our experience that optimizing the current network results in savings that get upper management's attention and generate excitement. Even though many companies would be more than happy to stop at this point and begin implementing network changes in hopes of realizing some of the projected savings, the network analysis is not yet complete. At this stage, many companies will benefit from taking some time to conduct a trend analysis. That is, the project team should determine what would happen in the future if nothing changed. This analysis can be used to determine what benefits will result in the long term from making changes to the network.

Although most companies find that a trend analysis is a necessary and useful part of the project, Recreational Gear proved to be an exception. For this company, "doing nothing" was not an option. Management had already stated that it would continue to acquire companies in the same line of business.

Furthermore, the company was less interested in potential transportation-capacity constraints in the future than in the immediate problem of rising transportation costs. In the end, Recreational Gear decided to dispense with the trend analysis. Whether or not it conducts a trend analysis, the project team's next step should be to create a goal statement for the network analysis.

Without such a goal statement, the network design project will suffer from a lack of focus. The company must state what it wishes to achieve in the future. Examples are:. For Recreational Gear, the goal was to "optimize" transportation costs for the current network of manufacturing facilities. Once the company has identified its objectives, it's up to the project team to state possible alternatives for achieving the goal s.

For example, if the goal is to move into new territories, the team might come up with alternatives such as building new capacity or acquiring an existing company. Listing more than one alternative will result in a greater likelihood of finding the best way. Sometimes the alternatives for achieving the goal s and the immediate benefits mentioned earlier are mutually exclusive; sometimes they overlap.

How to explore your supply chain dynamics?

For example, an alternative might involve expanding a current distribution facility or opening a new facility at another location. These alternatives would require considerable time and resources and would not be considered low-hanging fruit. An alternative that would be classified as low-hanging fruit would be the merging of the private fleet with the dedicated transportation operation while implementing a network of regional hubs. As a company lists its alternatives, it often discovers that it needs additional data. For example, one of Recreational Gear's alternatives was to create a regional distribution network.

Analyzing this alternative required getting cost data for unloading and reloading product. Weighing the alternatives Next the optimization model is used to determine the potential savings that each of the alternatives could produce. The network-optimization project for Recreational Gear involved the analysis of five scenarios for achieving the company's goal. These scenarios are shown in Figure 2. For scenario 1, the company would use the network-optimization tool to determine how to allocate carriers on lanes so as to move its materials and merchandise at the lowest possible cost, either by choosing the most economical carrier or by increasing the capacity utilization.

Like many companies, Recreational Gear was subject to end-of-month and end-of-quarter spikes in demand. The objective in scenario 2 was to analyze the use of seven regional hubs to buffer a period's transportation demand. Loaded trailers would be temporarily held at the regional hub until tractor units were available. Transportation savings would occur as the number of vehicles needed to cover a period's shipment was reduced. This scenario operated under two assumptions: All loaded product would clear the regional hub in three to seven days, and any loaded equipment at the regional hub would not require any reloading before moving to the final destination.

Scenario 3 involved the development of regional carrier networks domiciled at selected plants to supplement the existing long-haul network. The regional carriers would be limited to delivering out to miles with empty backhauls of the same distance. It was believed that there was a potential for savings here by reducing the higher costs paid to the longhaul network for delivering short distances.

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Scenario 4 involved the possibility of developing delivery hubs that would operate much like distribution centers, where workers would unload inbound shipments, remix the products, and then send them back out for delivery in a much more economical manner. The manufacturer had several private fleets that remained from earlier acquisitions. In scenario 5, the objective was to determine the effect of integrating those private fleets into the overall transportation network. These private fleets typically carry product to customers, then return empty to the originating plant, resulting in deadhead miles equal to the loaded miles.

In contrast, the centrally controlled fleet typically has vehicles move to the nearest plant needing a vehicle. The deadhead miles for the centrally controlled fleet are approximately 35 to 40 percent of the loaded miles. Merging the two fleets would result in a reduction of empty miles and a reduction in the overall size of the division's fleet.

The results: Was it worth all the effort? At the end of any project, the team must ask itself whether the project was worth the time and effort it spent. That's not always an easy question to answer. But by using a modeling tool, management can objectively weigh the potential savings against the total cost of the project. As noted in Figure 3, the potential savings from our manufacturer's project are substantial, with savings that could run into the millions of dollars.

The conclusion was that the project could deliver tremendous value for the company. Ultimately, however, the value of this project will be measured by how much of the potential savings are actually realized. To demonstrate the value of the project as quickly as possible and maintain senior management's support, Recreational Gear decided to begin its network redesign not with the scenario that promised to deliver the biggest savings but with the one that would be quickest to implement.


The implementation timeline often depends on the amount of control and discipline the company or business division, in this case has over the distribution network. In addition, some network redesigns require changes in processes and technology in order to become operational. Changes in either of these areas generally involve the extended enterprise. Therefore, it will take considerably more time and effort to implement some scenarios.

Given that the distribution network is not static, additional analyses of some scenarios and the environment may need to be conducted to confirm previous results. Prior to the project's start, Recreational Gear had already begun standardizing the packaging templates that showed distribution facilities how to optimize trailer loads scenario 1. This scenario also offered one of the largest potential savings of all the analyses performed. Because the decision about cubic utilization is done at the plant, it was relatively easy to implement process changes at this "local" level.

For these reasons, the company decided to continue with its efforts.

Optimization Tools for Logistics - 1st Edition

The shipping departments of the various units are currently being trained in using the packaging templates, and there is a concerted effort to integrate loading best practices and experience across the business division. In addition to load optimization, it was also relatively easy to implement the use of the most economical carrier. This involved incorporating another rule in the TMS that specified the selection of the most economical carrier when assigning loads.

Merging the private fleets into the centrally controlled fleet scenario 5 is also one of the top implementation priorities. Because the fleets are a legacy of earlier acquisitions, implementing this change to the distribution network will require management support and cooperation from the affected business units. At this time, the company is reviewing additional operational considerations to ensure that the decision won't have unintended consequences for other areas of the operation—for example, by creating transportation-capacity problems elsewhere in the network.

diphoconaquac.ml Once this review is completed—barring any unforeseen issues—a time line will be established for the merger of the various private fleets. Establishing regional pickup hubs scenario 3 is relatively easy to accomplish operationally. However, the shifting of deliveries from the end of the period to the beginning of the next period would require both internal and external changes.

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  • Although the savings from this change would be substantial, holding shipments for three to seven days would have an impact on the overall order cycle time for some customers. This type of change would require the support and buy-in from customers, sales, and the credit and accounting departments for the business units. For this reason, the implementation of this scenario will be the most intensive and require the most time. Currently, Recreational Gear is discussing the possibility of a pilot project to test the feasibility of this scenario.

    Power BI Showcase for Logistics Insights & Optimization

    Network optimization vs. It also involved no significant investment and little cooperation with other functional areas within the company. The company was not ready at this time to commit to a complete network design study. Instead it viewed this project as an opportunity to optimize the operations of an existing network design, focusing only on transportation. It was apparent to all concerned that we were optimizing a sub-system within the supply chain. For those companies that are ready to take it, the next step would be to redesign the total system—the entire supply chain of the company.

    This is where the real savings will occur. A redesign of the total system involves a "green field" approach, where all options and alternatives are considered. There are generally no limits placed on the network design as the software program determines the optimal number and location of facilities, the size of each facility, and which products customers will receive from which distribution point.

    Lessons learned During the course of the project, the team learned several key lessons.

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