Page 310 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 13: Logistics Design and Operational Planning

decisions can be characterized as strategic or tactical. Strategic transportation decisions concern Notes
long-term resource allocation, such as for extended time periods. Thus, strategic routing decisions
identify fixed transport routes that may be used for months or years. Tactical transportation
decisions concern short-term resource allocations such as daily or weekly routes. The objective
of transportation analysis is to minimize the combination of vehicles, hours, or miles required
to deliver product. Typical transportation analysis questions include: (1) How should deliveries
be grouped to form routes? (2) What is the best delivery sequence for servicing customers?
(3) Which routes should be assigned to which vehicle types? (4) What is the best type of vehicle
for servicing different customer types? and (5) How will delivery time restrictions be imposed
by customers? The distribution centre represents the central departure site for all delivery
vehicles, and each stop represents a customer location, such as a retailer.

Transportation Analysis Techniques

Routing and scheduling analyses have been well researched for logistics design and planning.
They are particularly important for firms completing partial load delivery activities such as
package or beverage distribution. The techniques can generally be classified as heuristic
approaches, exact approaches, interactive approaches, and combination approaches. Heuristic
approaches utilize rule-of-thumb clustering or savings techniques to develop routes by
sequentially adding and deleting stops. Exact, or optimal, approaches use mathematical (linear)
programming to identify the best routes. Historically, optimization solution methods have
been too computationally complex for even the fastest computers, but recent mathematical
programming advances have enhanced their capabilities.

Notes The main difficulties with most exact procedures are (1) the large number of
constraints and variables needed to represent even the basic routing and scheduling
problem and (2) the impact of this size on computation time and computer storage space.

Interactive approaches utilize a combination of simulation, cost calculator, or graphics capability
to support an interactive decision process. The decision maker identifies the alternatives for
evaluation. The interactive decision support system then determines and plots the routes and
calculates the performance characteristics in terms of time and cost. The decision maker then
interactively evaluates the performance characteristics of each alternative and refines the strategy
until no additional improvement is likely. The obvious drawback of interactive approaches is
the dependence on the skill and ability of the decision maker, particularly as the problem size
and complexity increase.
Combinations of the three approaches have proven very effective. Two criteria are important
when evaluating alternative solution approaches: generalizability and accuracy. Generalizability
is the ability to efficiently incorporate extensions for special situations, such as pickups and
deliveries, multiple depots, time windows, vehicle capacities, and legal driving times, in an
actual setting. Accuracy refers to the ability to closely approximate performance characteristics
and the results’ proximity to an optimal solution.

Did u know? Accuracy determines the level of and credibility in the possible savings as a
result of decreased vehicle operating expense, better customer service, and improved fleet
productivity.

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