Industrial vehicle routing problem: a case study

Abstract

This study is motivated by a real-world application of ABC (Pvt) Ltd., a well-known FMCG (fast-moving consumer goods) industry. The industry have nine agents (in two operating regions) from which it can serve its 5483 clients. We focus on this industry’s outbound logistics in its two operating regions, namely Colombo and Gampaha, while taking into account its distribution and current decentralized redistribution processes, since additional routing costs have been identified in the existing setup. The goal of this study is to implement a better route plan that optimizes the truck allocation system at the lowest possible costs of transportation, warehouse, and administration. First to determine a best location for the new facility, the gravity model is used to pinpoint the exact location of the central warehouse. Then a centralized delivery strategy is applied to establish a better path between the sub-clusters. The performance of this centralized policy is evaluated on a real-world case study data. The relative cost benefit/saving (34%) of the centralized distribution system is then brought into focus and verified with solid statistics by comparing the overall cost of the centralized distribution system to the total cost of the existing decentralized distribution system. Finally, we highlight how decision-makers and policymakers in the logistics area might use our centralized delivery strategy to reduce extra-costs, particularly during the transportation of commodities.