Improving the distribution efficiencies by optimizing the vehicle mix

Abstract

The purpose of this project was to analyze and optimize the vehicular distribution mix, for a large logistic service provider in India. Their services were divided into external and internal services. The focus of the project was internal services. The firm provides logistic services to the retail chain of its parent’s firm. The service records of the last year for the firm formed the basis of our analysis. The analysis and ensuing optimization focused on the following aspects: • Overall transportation cost – Objective was to minimize the total costs • Capacity utilization – Objective was to maximize capacity utilization • Frequency of trips – Minimize frequency of truck trips The main cost levers were identified by utilizing linear regression, which revealed the major cost drivers as distance travelled, time taken for delivery, and volume of vehicles. Building upon the analysis, two model routes were selected for optimization purposes: • Bangalore – To optimize the daily truck requirements for a high-volume sector • Goa- To optimize frequency of truck trips for a relatively low-volume sector The results of our analysis have been attached as exhibits and during the course of the report. The detailed worked out optimization model has also been provided with the report. Stemming from our analysis, we have identified 3 strategic initiatives to improve the services: • Optimize local delivery requirements through the concept of ‘Milk delivery’ runs • Optimize utilization of trucks from external contracts by using options contract • Optimize truck request schedule on low frequency routes Short descriptions and recommendations on these have been provided in the report.