The solution
A major European DIY retailer supplied stores from multiple depots through logistics service providers. Standard routing logic treated distance as the main cost, but the actual freight bill used nonlinear zone tariffs and volume discounts.
The research team built a decision-support tool for this richer problem. It considered two delivery modes: retailer-proposed tours accepted by carriers under duration and detour rules, or single shipments handed to common carriers.
The tool used a three-component set-partitioning algorithm over feasible tours. IDEAS records that it optimally solved daily instances with up to 150 stores and cut transportation cost by an average of 8%, worth more than EUR 1 million per year.
The invention was to stop pretending the map was the invoice. The route plan became smarter once the tariff itself became part of the optimization.
What it achieved
Optimize the bill, not the kilometers
Why it worked
The model matched the carrier's real zone-based billing rather than a simplified distance cost.
It compared proposed tours against common-carrier shipment options in one decision.
Exact planning made daily distribution more structured without requiring the retailer to own the fleet.
What can be applied
When the price schedule is nonlinear, shortest-route software can be systematically wrong; model how the carrier actually charges.
Aftermath
The case was published in INFORMS Journal on Applied Analytics in 2024. Although the retailer is unnamed, the pattern is broad for store distribution: when freight contracts contain zones and discounts, route optimization must understand the contract.
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