Analysis and improvement of inbound transportation at DeLaval Tumba : A vehicle routing problem case study

Abstract: Transportation plays a significant role in the supply chain. The total transportation cost can be up to about 20% of the nal value of a product, so it is important to make good decisions in both inbound and outbound transportation. Inbound transportation at DeLaval Tumba is an area that has not been investigated for a long time. There is a need to set up a good overall inbound transportation strategy. It was decided to limit the study to cover only suppliers from Poland, and to apply the best resulting method on the Malmo area. In order to setup the transportation strategy, the open vehicle routing problem was solved. The results gave a solution implying routes for a vehicle that minimized the kilometers driven for a given demand. Some suppliers were put together on routes, forming so-called milk-runs, but sometimes it was more cost-beneficial to transport via less than truck load. Four different approaches were chosen to solve the problem that differ both in difficulty in execution and how good the solution is. A major 3PL carrier was contacted in order to get cost quotations on the resulting desired routes, and consequently, it was possible to decide when it is feasible to transport via milk-runs and when LTL is feasible. By implementing the proposed transportation network, it is believed that DeLaval Tumba could save up to 10% of inbound transportation in Poland. It was found that despite the increasement in inventory cost, the new transportation network in Poland should have a cost-benecial effect on the supply chain.