SCM SCVehicle-Routing-and-Scheduling.ppt

Scheduling and routing

1. CHAPTER 7CHAPTER 7
VEHICLE ROUTING AND VEHICLE ROUTING AND
SCHEDULINGSCHEDULING

2. 
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

3. 7.17.1
TRANSPORT TRANSPORT
SERVICE SELECTIONSERVICE SELECTION

4. 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

5. 7.1.17.1.1
Basic Cost Trade-OffsBasic Cost Trade-Offs

6. 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

7. Example 1
The 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

8. 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 to
be negligible.

10. $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
ICDT
365
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

11. 7.1.27.1.2
Competitive Competitive
ConsiderationsConsiderations

12. 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

13. 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

14. 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

15. Transport
Mode
Transport RateDelivery Time
Rail $2.50/case 7 days
Truck 6.00 4
Air 10.35 2

16. Transport
Mode
Cases
Sold
Gross
Profit
Transport costNet 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

17. 7.1.37.1.3
Appraisal of Selection Appraisal of Selection
MethodsMethods

18. 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

19. 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

20. 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.

21. 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

22. 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

23. 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

24. 7.27.2
VEHICLE ROUTINGVEHICLE ROUTING

25. 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

26. 7.2.1Separate 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

27. 7.2.2Multiple 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

28. 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

29. (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

30. 
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

31. (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