Determining the Number and Location of Warehouses to Minimize Logistics Costs of Business to Consumer (B2C) Distribution

I Nyoman Sutapa,Magdalena Wullur,Tania Nano Cahyono,R.H Setyobudi,R Kala Mahaswa,J Burlakovs

doi:10.1051/shsconf/20207601012

I Nyoman Sutapa, Magdalena Wullur + Show 4 more

Open Access

https://doi.org/10.1051/shsconf/20207601012

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Abstract

The article discusses a case study at a company that works on Fast Moving Consumer Goods (FMCG) section using B2B distribution system, and is conducting a market test for its new alternative tobacco products using B2C distribution system. The purpose of this study is to determine both number and location of warehouses that provides a minimum total logistics costs for the B2C process, where the company is currently still using company-owned B2B warehouses. Determination of the number and location of these warehouses is performed using Agglomerative Hierarchical Clustering where grouping is based on the shortest distance and is done using Evolutionary Solver. Centre of Gravity is also used to determine the location of the warehouses. Iteration will be carried out to obtain the number of warehouses that provide minimal total cost. The result of the modelling shows that the optimal number of warehouses is six and each warehouse will have their own market division.

Highlights

Distribution and logistics management is a critical company function
A company distribution policy observed in this case study, offers a new tobacco alternative product using that B2C e-commerce business process
Agglomerative Hierarchical Clustering (AHC) is one of the cluster methods that is based on hierarchical approach, where it is started with a single cluster which repeatedly combines the two closest clusters to cover all existing clusters [10]

Summary

Introduction

Distribution and logistics management is a critical company function. Professionals in this field play a key role in fulfilling customer demands, ordering and managing inventory, controlling inbound and outbound shipments, reducing costs, saving time, and meeting company objectives. Distribution is a main logistics activity that holds an important role in a business competitiveness. An efficient transfer of goods from the manufacture to the point of consumption in a cost-effective way while providing an acceptable service to the consumer is the main logistics concern [1]. B2C is a new trend in the distribution of goods in the digital economy era. A company distribution policy observed in this case study, offers a new tobacco alternative product using that B2C e-commerce business process.

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