Evaluation of the distribution model and mode of transportation of PT X

Abstract

Logistics contribute to cost efficiency accompanied by increased productivity and profits along with improvements in service to consumers or customers. Transportation issues are related to how companies reduce logistics costs by building efficient transportation networks. So far, the company PT.X has been sending products to all consumers using the Direct Shipment with Milk Runs distribution model with the truck transportation mode. The highest transportation costs at PT. X reached 19% and the average percentage of costs was 14% of the company’s net income (total Revenue). It appears that the cost of distribution of PT.X products has been Out of Control due to reaching more than 10% of the company’s net income. A percentage of this amount is included in the Major Opportunity for Savings or an opportunity for improvement. In this study a solution is proposed in the form of the best type of delivery and the mode of transportation that is suitable for the type of delivery. The right type of shipping at the company is Direct Shipment Milk Runs which has two alternative transportation. From the latest delivery route arrangement, transportation costs drop to 8% of total revenue when using truck and 4% of total revenue when using motorized rickshaw.