The encyclopedia · Engineering & Operations · Technical decision · 2020-2023
DHL's routing suite cut bid costs by over $117M in 2.5 years
DHL built an integer-programming toolbox that prices and routes huge delivery bids, lifting its win rate and cutting costs.
DHL Supply Chain
the move
DHL Supply Chain North America competes for contracts by promising to move customers' freight more cheaply than rivals. Its planners had to route fleets, decide what to outsource, and price bids, combinatorial problems involving up to nearly a million packages, done largely by hand.
With Ohio State University, DHL built TNO, a four-module integer-programming suite covering routing, outsourcing, pooling, and bid pricing. Analysts run all modules to build proposals, set fleet sizes, and position resources for existing customers.
Over 2.5 years since 2020, TNO produced over $117 million in estimated savings for DHL and its customers, contributed a 20% win-rate increase, and cut CO2 emissions by at least 0.1 megatons. Win rates on bids generated with TNO ran roughly 15% to 60%, with more than 20% generated after 2020.
why it works
- Routing and outsourcing are coupled; optimising them together beats local fixes.
- Accurate cost models mean DHL bids only on profitable work.
- Faster bid preparation lets analysts explore more scenarios.
- The tool captured expert logic, so winning bids became repeatable.
what transfers
When every bid is a routing puzzle, the company that solves it fastest and cheapest wins more contracts. Optimisation tools turn a cost centre like bid preparation into a revenue engine.
what came after
DHL was named a 2023 Franz Edelman Award finalist for TNO, with INFORMS citing savings of more than $98.6 million per year and $116.5 million in total past savings; the system remains in daily use for bidding and positioning.
references
- Innovative Integer Programming Software and Methods for Large-Scale Routing at DHL Supply Chain
- Innovative Integer Programming Software and Methods for Large-Scale Routing at DHL Supply Chain
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