Warehousing and distribution network design from a Third-Party Logistics (3PL) company perspective

Abstract

This paper deals with the problem of optimizing the logistics network of a Third-Party Logistics (3PL) company. The goal is to minimize the cost of storage and transport operations, in the case of multiple warehouses, multiple suppliers, multiple customers, multiple products and multiple types of transportation vehicles. A new Mixed Integer Linear Program (MILP) model is proposed for this interesting problem. The related decisions include selection of (a) the warehouse(s) to store each product, (b) the inventory level per product per warehouse, (c) the warehouse(s) to serve each customer and (d) the appropriate vehicles to transport the products from the suppliers to the warehouses, and from the latter to the final customers. The model was applied in case study of a 3PL company in Greece to optimize part of its supply chain that comprises three warehouses, 23 suppliers and 53 customers. The results obtained were very encouraging, since overall warehousing and distribution costs were lowered by 10.84% compared to the way the company operates currently.