A framework for analysing long‐range direct shipping logistics
| Pages | 876-899 |
| Published date | 01 September 2005 |
| DOI | https://doi.org/10.1108/02635570510616094 |
| Date | 01 September 2005 |
| Author | A.C. Caputo,L. Fratocchi,P.M. Pelagagge |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
A framework for analysing
long-range direct shipping
logistics
A.C. Caputo, L. Fratocchi and P.M. Pelagagge
Department of Mechanical, Energy and Management Engineering,
Faculty of Engineering, University of L’Aquila, L’Aquila, Italy
Abstract
Purpose – To present a decision support system (DSS) enabling the analysis of the cost-effectiveness
of direct-shipping long-haul road transport policies, including full truck load (FTL) and less than truck
load (LTL) modes, and to select the optimal carrier.
Design/methodology/approach – Analytical estimation of transportation costs is provided in a
framework including an interactive computer procedure and a dedicated database structure capable of
characterizing the logistics system.
Findings – Main criticalities of manual logistic planning are: sub-optimal selection of carrier and
excessiveuse of LTL transport, while the optimal FTLvs LTL trade-off is not fully explored in practice.
Research limitations/implications – This is an analysis tool of user-defined scenarios and does
not provide the automatic synthesis of shipments planning. Admittedly, this model does not attempt to
optimize the shipping strategy, but to quantitatively assess the effects of the adopted decisions.
Practical implications – Alternative shipping policies can be compared to perform what-if
analyses and explore the outcome of alternative decisions (FTL vs LTL shipping modes) even in terms
of transportation expenditures. Allows rapid selection of the optimal motor carrier and assesses the
extra cost due to a sub-optimal choice. Gives the experienced manager a framework for critical
assessment of shipping decisions, suggesting improvement areas for cost reduction.
Originality/value – With respect to other software tools for carrierselection provides explicitanalysis
of extra costs incurredby manual planning, thus becoming a strategic tool for logisticdecision making.
Furthermore, enablesmanagerial insights to be gained and makes manual planning more effective.
Keywords Decision supportsystems, Forward scheduling, Distribution management,
Transport managemen t
Paper type Research paper
Nomenclature
EC ¼extracost (e)
FTL ¼full truck load
K¼set of zones reached by a single FTL
shipping
LC ¼local transportation cost (e)
LTL ¼less than truck load
N¼number of zones included in set K
served by a FTL shipping
NC ¼number of customers
OC ¼optimal cost (e)
RC ¼specific transportation cost (e/t) from
the consolidation centre to the final
customer in LTL mode depending on
weight range
TC ¼total shipping cost (e)
UEC ¼unitary extra charge (e/additional
stop)
W¼transported weight (t)
WR ¼weight range (t)
ZC ¼destination zone – based shipping
cost in FTL mode (e)
Subscripts
j¼zone index
i¼carrier index
m¼generic zone included in set K ð1#
m#NÞ
n¼weight range index
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
www.emeraldinsight.com/researchregister www.emeraldinsight.com/0263-5577.htm
IMDS
105,7
876
Industrial Management & Data
Systems
Vol. 105 No. 7, 2005
pp. 876-899
qEmerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570510616094
1. Introduction
In a context of growing market globalisation, rapid diffusion of information and
communication technologies and increasingly widespread de-localization of
manufacturing activities, product mobility is preferred to their accumulation in
warehouses, involving a continuous flow of materials through the supply chain
(Zografos and Giannouli, 2002). Therefore, firms have to supply distant markets from
their own warehouses and plants with always-greater frequency. This also involves
relevant expenditures. Weil (1998) for instance states that transportation costs on
average impact for about 50 per cent of total logistic costs. This requirement will
become even more critical with the progressive diffusion of e-commerce activities
(Caputo et al., 2004; Ho et al., 2003; Frank, 2004; Soliman and Youssef, 2003). Such
factors make the distribution logistics increasingly important and often critical for
competitiveness of companies (Lai et al., 2004) justifying major efforts to reduce logistic
expenditures to the greatest extent possible in order to delivery goods at a reduced
price to customers. Road transport is by far the main mode of goods transportation in
continental industrialized countries (European Union, 2001). As an example, in the
period 1970 to 2000 it has grown in the European Union countries from 52 to 74 per
cent of the total quanti ty of tonne kilometres hauled reaching a v alue of
1348 £10
9
tkm (European Communities, 2003).
In this context, long range direct shipping (LRDS) distribution systems (i.e. long
haul transportation from the manufacturer to the final customers without intermediate
warehouses) play a relevant role for many industrial firms having customers
distributed over a wider continental area.
Therefore, a major logistic task is the efficient execution of LRDS activities. This
involves a correct utilization of the leverages defining the performances of the
distribution system, which in this kind of scenario involve the balance of full truck load
(FTL) and less than truck load (LTL) shipments, the choice of the time bucket over
which orders may be aggregated, the assignments of customer orders to these two
different modes of transportation, and the correct selection of the motor carrier so that
freight may be shipped to customers in a cost-effective manner. Such issues are quite
relevant but in practice are often neglected as they are usually dealt with by resorting
to manual planning by a logistic manager, thus preventing from an effective cost
minimization.
In order to contribute towards the solution of the problem, in this work a fast and
easy to use automated procedure to characterize a LRDS distribution scenario and its
overall performances is presented. This decision support system (DSS) enables to
assess the quality of decisions operated by the logistic manager and may act as a
diagnostic tool in that it highlights the possible causes of the logistic system
inefficiency as far as the road transport decisions are concerned. Moreover, it can be
used to assist the traffic manager in choosing the lowest cost carrier for any given
shipment which is the first step towards the minimization of transportation costs.
In this paper, following a literature review, the most common road transport
modalities are presented, in particular discussing the adopted fees structure and their
implication on logistic choices. Afterwards, the model for LRDS analysis is illustrated,
specifying its software structure and the related algorithm. Finally, the model is
applied to a specific Italian multi-plant firm operating in the chemical industry
(producing plastic films for packaging) and shipping its product by road across
Analysing direct
shipping
logistics
877
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