chapter 7 vehicle routing and scheduling
TRANSCRIPT
CHAPTER 7CHAPTER 7VEHICLE ROUTING AND VEHICLE ROUTING AND
SCHEDULINGSCHEDULING
transportation: a key decision in logistics mix
transportation absorbs a higher percentage of logistics costs than any other logistics activity
transportation decisions are mode selection carrier routing vehicle scheduling, and shipment consolidation
7.17.1TRANSPORT TRANSPORT
SERVICE SELECTIONSERVICE SELECTION
Selection of Mode of Transportation depends on a variety of service
characteristics speed time of delivery inventory carried
from surveys that rank transport service characteristics, shows that, except for cost, speed and dependability are the most important factors
cost of service, average transit time (speed), and transit-time variability (dependability) are the basis for transportation modal selection
7.1.17.1.1Basic Cost Trade-OffsBasic Cost Trade-Offs
Basic Cost Trade-Offs When transportation is not used to provide a
competitive advantage, the best choice is by trading off the cost of using a particular transport service with the indirect cost of inventory associated with the selected transportation mode
speed and dependability affect shippers and buyer’s inventory levels the amount of inventory in transit between the
shipper and buyer’s locations slower, less reliable services create more
inventories in the channel inventory carrying cost may be trade-off with
lower cost for the transportation service the favored service will be the one that offers the
lowest total cost consistent with customer service goals while meeting customer service objectives
Example 1The CarryAll Luggage Company produces a line of luggage goods finished goods inventories are kept at the plant site goods are then shipped to field warehouses by common
carriers rail is currently used average transit time for rail shipments is T = 21 days at each stocking point,
average of 100,000 units average cost of C = $30 per unit inventory carrying cost is I = 30% per unit cost per
year To select the mode of transportation that will minimize
the total costs estimated that for every day that transit time can be
reduced from the current 21 days, average inventory levels can be reduced by 1%
Demand, D = 700,000 units sold per year
Transport service
Rates ($/unit)
Door-to-door Transit Times
(days)
No. of shipments per
year
Rail 0.10 21 10
Piggyback 0.15 14 20
Truck 0.2 5 20
Air 1.40 2 40
Procurement costs and transit-time variability is assumed tobe negligible.
$1,244,771$677,801$797,769$1,333,966Totals
(0.30)(31.4)(25,000)/2= 117,750
(0.30)(30.2)(50,000)/2= 226,500
(0.30)(30.15)(50,000)/2= 226,125
(0.30)(30.1)(100,000)/2= 451,500
IC’Q/2Field inventory
(0.30)(30)(25,000)/2= 112,500
(0.30)(30)(50,000)/2= 225,000
(0.30)(30)(50,000)/2= 225,000
(0.30)(30)(100,000)/2= 450,000
ICQ/2Plant inventory
(0.30)(30)(700,000)(2) 365= 34,521
(0.30)(30)(700,000)(5) 365= 86,301
(0.30)(30)(700,000)(14) 365= 241,644
(0.30)(30)(700,000)(21) 365 = 362,466
ICDT365
In-transit Inventory
(1.40)(700,000)= 980,000
(0.20)(700,000)= 140,000
(0.15)(700,000)= 105,000
(0.10)(700,000)= 70,000
R X DTransportation
AirTruckPiggybackRailMethod of Computatio
n
Cost Type
Table 7-2 Transportation Choice Evaluations for the CarryAll Luggage Company
7.1.27.1.2Competitive Competitive
ConsiderationsConsiderations
Selection of transportation mode to create a competitive service advantage when buyer purchases goods from >1 supplier, the
logistics service offered + the price, may influence the supplier’s selection
if suppliers select the transport mode, they can control this element and thus influence the buyer’s patronage
to buyer, better transport service (lower transit time and transit-time variability) means
lower inventory levels and/or operating schedules can be met with greater
certainty The buyer’s action is to shift its purchasing
decision toward the supplier offering the preferred transport service
The profit may defray a premium transport service and encourage supplier to seek the transport service appealing to the buyer rather than simply the one offering the lowest cost
transport service selection becomes a joint decision between supplier and buyer
supplier competes for the buyer’s patronage through the choice of a transport mode
buyer responds to the choice by offering the supplier more business
more business will depend on the transport service differential created among competing suppliers
supplier will not settle on a single transport service in a dynamic, competitive environment
Example 2 A manufacturer purchases 3,000 cases of
plastic parts valued at $100 per case from two suppliers
purchases are currently divided equally between the suppliers
supplier uses rail transport and achieves the same average delivery time
if for each day that a supplier can reduce the average delivery time, the manufacturer will shift 5% of its total purchases, or 150 cases, to the supplier
supplier earns a margin of 20% per case before transportation charges
Supplier A would like to consider whether it would be beneficial to switch from rail to air or truck modes
Transport Mode
Transport Rate Delivery Time
Rail $2.50/case 7 days
Truck 6.00 4
Air 10.35 2
Transport Mode
CasesSold
GrossProfit
Transport cost Net profit
Rail 1,500 $30,000.00 - $ 3,750.00 =
$26,250.00
Truck 1,950 $39,000.00 - $11,700.00 = $27,300.00
Air 2,250 $45,000.00 - $23,287.50 = $21,712.50
Profit comparison for Supplier A’s Transport Modal Choices
7.1.37.1.3Appraisal of Selection Appraisal of Selection
MethodsMethods
Methods for transport service selection need to account for the
indirect effect that transportation choice has on inventory costs
the patronage of the shippers and consignees
there are other factors which are not under the control of the logistics manager
1. Effective Cooperation between Supplier and Buyer a reasonable knowledge of each party’s
cost is available if they are separate legal entities, doubt
that perfect cost information is possible unless some information exchange is worked out
Sensitivity to the other party’s reactions to a transport
service choice
or to the degree of patronage
should indicate the direction of cooperation
2. Competing suppliers in the distribution channel
buyer and the supplier should act rationally to gain optimum cost-transport service trade offs
rationality among the parties can not be guaranteed.
3. Price effects
supplier might raise product price to provide a higher-quality transportation service than the competitor
buyer should consider both price and transport performance when determining patronage
4. Transport rate
changes because of changes in product mix and inventory cost
adds a dynamic element to the problem that is not directly considered
5. Indirect effects of transport choice on supplier inventories
suppliers and buyers may experience increased or decreased inventory levels as a result of the shipment size associated with the transport choice
suppliers may adjust price to reflect this, which, in turn, will affect transport choice
7.27.2VEHICLE ROUTINGVEHICLE ROUTING
VEHICLE ROUTING transportation costs range between 1/3 to 2/3 of logistics
costs improve efficiency through maximum utilization of
transportation equipment and personnel is a major concern
length of time that goods are in tran sit reflects on the number of shipments a vehicle can made within a given period of time
to reduce transportation costs and improve customer service, finding the best path to minimize the time or distance of travel, is an important consideration
many variations of routing problems find a path through a network where the origin point is
different from the destination point find a path which involves multiple origin and
destination points find a path where origin and destination points are the
same
7.2.1 Separate and Single Origin and Destination Points
problem of routing a vehicle through a network can be solved by many methods
the simplest and most straightforward method is the shortest route method
Example 3
7.2.2 Multiple Origin and Destination Points multiple source points that may serve
multiple destination points commonly occurs when there is more than
one vendor, plant, or warehouse to serve more than one customer for the same product
further complicated when the source points are restricted in the amount of the total customer demand that can be supplied from each location
solved by transportation method Example 4
7.2.3 Coincident Origin and Destination Points
origin point is the same as the destination point commonly occurs when transport vehicles are
privately owned, e.g. routing of delivery trucks from a warehouse to
retail points and return to the warehouse local delivery trucks from retail stores to
customers routing of school buses, newspaper delivery
trucks, garbage collection trucks, and cars making deliveries of meals to offices
the objective is to find the sequence in which the points should be visited that will minimize to tal travel time or distance
known as the “traveling salesman” problem cognitive and heuristic solution procedures are
used to solve these problems
(a)Points Are Spatially Related solutions can be found by using the
pattern recognition capabilities of the human mind
good stop sequences are formed when the paths of the route do not cross
the shape of the route will usually bulge, or form a teardrop shape, where possible
illustrated in Figure 7-6 based on these two principles, an analyst
can quickly sketch out a route plan that might require a computer many hours to find
alternatively, a computer model can be used to find the stop sequences on a route
better choice when the spatial relationship between stops does not represent their true travel time or distance, e.g
travel barriers one-way streets, or traffic congestion present
locating stops geographically, e.g. coordinate points, can reduce the amount of data
the computer is assigned the task of estimating the distances or times
computational procedures have been developed that rapidly solve the problem and produce results that are close to optimum
Example 5
(a)Points Are Spatially Related
(b)Points Are Not Spatially Related where it is not easy to establish the spatial
relationship between stops on the tour, or where the spatial relationships become
distorted because of exact distances, or times, should be specified between stop pairs
cognitive procedures are less applicable must resort to a mathematical procedures
to treat this problem although the inter-stop distances, or times,
can be exact, solution procedures tend to gives approximate answers
example 6