Abstract
One of the most challenging decisions that has to made routinely by dispatch managers at distribution centres of warehousing and distribution businesses in the retail sector involves the assignment of delivery vehicles to service customers exhibiting demand for retail goods and the subsequent routing of these delivery vehicles to the various customers and back again. Perhaps surprisingly, these dispatch managers do not always use vehicle routing software to schedule goods deliveries to customers, instead often relying on teams of human schedulers who perform this task manually. The reason for not using such software is usually a perception that it may be difficult to integrate the software with existing enterprise resource planning systems already in use. In such cases, estimates of potential costs savings that may be brought about by such software is often required before the dispatch department will risk the significant step towards investing in vehicle routing planning software. Dispatch managers may then employ these cost savings estimates in cost-benefit trade-off analyses. This paper contains a practical case study in which the potential cost savings of a vehicle routing optimisation approach are quantified for a large retail distribution centre in the South African Western Cape in a bid to support its decision as to whether or not to invest in vehicle routing planning software.
Highlights
It is well known that distribution centres (DCs) form a crucial part of a retail supply chain, facilitating the shipment of retail goods from suppliers to end customers
Perhaps one of the most challenging decisions that routinely has to be made by the dispatch departments of warehousing and distribution businesses in the retail sector involves the assignment of delivery vehicles to service customers exhibiting demand for retail goods and the subsequent routing of these delivery vehicles from the DC to the various customers and back to the DC again
Based on our findings during an exploratory literature review, we describe an acclaimed hybrid metaheuristic in §4 selected for the purpose of solving approximately three representative capacitated VRP with time windows (CVRPTW) model instances in a special case study in §5, involving dispatch data obtained from the SPAR Western Cape DC
Summary
It is well known that distribution centres (DCs) form a crucial part of a retail supply chain, facilitating the shipment of retail goods from suppliers to end customers. Reasons for not using specialised software to streamline vehicle routing dispatch decisions may be related to the often prohibitive cost of such software or may be the result of such software being difficult to integrate with existing enterprise resource planning (ERP) systems already in use It is often difficult for a retailer to take the significant step towards investing in VRP planning software for the aforementioned reasons, among others. We were tasked by the SPAR Western Cape DC to assist its management in determining whether such an investment step would be appropriate in terms of the expected cost savings that may be brought about by VRP planning software We did this by quantifying the range of potential savings in the cost associated with its delivery vehicle routing decisions that may be realised if a VRP optimisation approach were to be adopted when performing these decisions as opposed to performing these decisions manually based on (considerable) historical route scheduling experience.
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