Improvement of Inter-facility Shipments Efficiency by Means of a Heuristic Bin Packing Algorithm

Abstract

This paper investigates how to improve the efficiency of cross-shipments between warehouses and shipments between factories and warehouses in multi-divisional firms with a high level of inter-facility material handling activities. Specifically, the paper focuses on the optimisation of the freight transportation of finished goods between the firm's warehouses and/or production plants. It is shown how transportation costs can be minimised by adopting optimal tools and practices for order consolidation and carrier loading. First, the main features of inter-facility transportation in modern multi-divisional firms are addressed, together with different aspects of the freight consolidation problem. Then, an original heuristic bin packing algorithm is introduced and tested. This algorithm, tailored for a field application, makes it possible to optimise the way in which order lines are assigned to carriers. The objective is to minimise the number of shipments required. The applicability and the implications of the general framework presented are then tested in a real industrial scenario. The case refers to the inter-facility transportation of a major Italian multi-divisional firm operating in the ceramic tiles field. Results obtained show how a significant improvement can be gained through ad hoc consolidation and transportation practices, both in terms of loading efficiency, understood as the ratio between the total weight loaded on a truck and its carrying capacity, and in terms of overall distribution costs.