Minimizing Total Logistics Cost for Long-Haul Multi-Stop Truck Transportation

Whenever there is sufficient demand, companies generally prefer the full truckload (TL) option for long-distance transport, resulting in large and less frequent shipment operations that can be costly if inventory carrying costs are high. Less than truckload (LTL) is another option for transport when carrying costs are high and/or there is insufficient demand. Shipment consolidation provides another option that combines many of the benefits of both TL and LTL. Shipment consolidation is a cost-effective transport solution that combines different size shipments into a single truckload. Combining many loads as a single load brings together economies of scale and potential savings. Traditional routing techniques that minimize distance are not suitable for shipments that have different origins and destinations because it can be beneficial to travel further to minimize overall transport and inventory cost, or what is termed total logistics cost (TLC). Effective consolidation of multi-stop routes to minimize TLC requires routing procedures that are more computationally intensive to find beneficial combinations of loads into consolidated shipments. In this study, we have developed a saving-based procedure to determine consolidated route sequences that minimize the TLC of shipments. Twenty-one data sets were produced using real city coordinates and population densities in North Carolina to demonstrate the effectiveness of the procedure. The solutions of the proposed method are compared with the solutions of the traditional Clarke and Wright (C-W) algorithm. Although the traditional C-W algorithm provides very fast solution times, the proposed method has produced much better solution values.

ANALYTICAL RESULTS ON THE SERVICE PERFORMANCE OF STOCHASTIC CLEARING SYSTEMS

Stochastic clearing theory has wide-spread applications in the context of supply chain and service operations management. Historical application domains include bulk service queues, inventory control, and transportation planning (e.g., vehicle dispatching and shipment consolidation). In this paper, motivated by a fundamental application in shipment consolidation, we revisit the notion of service performance for stochastic clearing system operation. More specifically, our goal is to evaluate and compare service performance of alternative operational policies for clearing decisions, as quantified by a measure of timely service referred to as Average Order Delay ( $AOD$ ). All stochastic clearing systems are subject to service delay due to the inherent clearing practice, and $\textrm {AOD}$ can be thought of as a benchmark for evaluating timely service. Although stochastic clearing theory has a long history, the existing literature on the analysis of $\textrm {AOD}$ as a service measure has several limitations. Hence, we extend the previous analysis by proposing a more general method for a generic analytical derivation of $\textrm {AOD}$ for any renewal-type clearing policy, including but not limited to alternative shipment consolidation policies in the previous literature. Our proposed method utilizes a new martingale point of view and lends itself for a generic analytical characterization of $\textrm {AOD}$ , leading to a complete comparative analysis of alternative renewal-type clearing policies. Hence, we also close the gaps in the literature on shipment consolidation via a complete set of analytically provable results regarding $\textrm {AOD}$ which were only illustrated through numerical tests previously.

Shipping Consolidation Across Two Warehouses with Delivery Deadline and Expedited Options for E-commerce and Omni-channel Retailers

Problem definition: Shipment consolidation (i.e., shipping multiple orders together instead of shipping them separately) is commonly used to decrease total shipping costs. However, when the delivery of some orders is delayed, so they can be consolidated with future orders, a more expensive expedited shipment may be needed to meet shorter deadlines. In this paper, we study the optimal consolidation policy focusing on the trade-off between economies of scale due to combining orders and expedited shipping costs, in the setting of two warehouses. Academic/practical relevance: Our work is motivated by the application of fulfillment consolidation in e-commerce and omni-channel retail, especially with the rise of so-called on-demand logistics services. Sellers have the flexibility to take advantage of consolidation by deciding when to ship the orders and from which warehouse to fulfill the orders, as long as the orders’ deadlines are met. Methodology: We use Dynamic Programming to study the optimal policy and its structure. We also conduct extensive simulation tests to evaluate the performance of heuristics that are based on structures of the optimal policies. Results: The optimal policies and their structures are characterized. Using the insights of these structural properties, we propose two easily implementable heuristics that perform within 1%–2% of the optimal solution and outperform other benchmark consolidation methods in numerical tests. Managerial implications: Consolidation is shown to significantly reduce the outbound shipping costs. Retailers can take advantage of it to effectively improve the standard policies by simply applying the threshold-form heuristics we propose.