Modeling Freight Consolidation in a Make-to-Order Supply Chain: A Simulation Approach

Mohammed Alnahhal,Bashir Salah,Diane Ahrens

doi:10.3390/pr9091554

Abstract

Shipment consolidation is one of main initiatives to reduce CO2 emissions and transportation cost. It reduces the number of shipments per customer and reduces transportation costs by using larger shipments. This paper investigates the temporal consolidation process in a central consolidation center in a make-to-order supply chain. This research was motivated by a case study of a design furniture company that has many suppliers and customers in large parts of Europe. Simulation was used to check the effect of a new and a special time-based temporal consolidation on the response time in outbound logistics. A soft delivery deadline that is less than the average lead time was used because of the long lead time. Arena Software was used to model the supply chain in order to find the best circumstances to use consolidation. Results showed that temporal consolidation could be more effective when order preparation time is with larger variability. The useful waiting is more when there is at least one order every four days. A formula that approximates the percent of reduced shipments was found. Furthermore, many shipments can be reduced without severely affecting the average response time. The value of the study is that it investigates consolidation problems in a high-mix low-volume environment that was overlooked by previous research.

Highlights

This study shows the importance of temporal consolidation to reduce the total transportation costs in a make-to-order environment where lead time is longer than usual
Cost savings are mainly advantageous for the 3 PL, which has a consolidation center to supply hundreds of customers in the west of Europe
The effect of temporal consolidation on increasing the average lead time was limited, but with suitable parameters values, the percent of reduced shipments can exceed 30%

Summary

Introduction

This paper investigates the freight temporal consolidation problem for a third-party logistics provider (3 PL) that transports products from multiple suppliers to a consolidation center, and to large number of retailers. Shipments from geographically dispersed suppliers to different customers are first transported to an intermediary facility for possible consolidation, which decreases transportation costs because of economies of scale that result from larger shipments [2]. The 3 PL company can hold the products for possible consolidation opportunities as long as their delivery deadlines are not exceeded [3]. Sustainable supply chain is about achievement of an organization’s social, environmental, and economic goals. These goals are helpful for the organization and for the community

Methods

Results

Conclusion