The encyclopedia · Strategy & Leadership · Operational decision · 2014
Webb Wheel cut outbound logistics costs 4.4% by planning loads and routes together
A load-planning algorithm at Webb Wheel optimizes order-to-load assignment and delivery routing in one step, saving 4.4%.
Webb Wheel Products
the move
Webb Wheel manufactures brake drums, rotors, hubs and spoke wheels, and ships new customer orders every day. Loads had to be combined into truckloads, less-than-truckloads and containers while respecting due dates, carrier capacities and customer locations.
The company implemented an integrated load-planning algorithm that first assigns orders to transportation modes and carriers based on total cost, then solves the routing of each load as a modified traveling salesman problem to find the cheapest drop sequence. A scalable database with a graphical user interface made it usable daily.
Tested on four months of Webb Wheel data, the model beat the previous process and delivered cost savings of 4.4% after implementation, exploiting mode-specific capacities, customer locations, inventory availability and due-date restrictions.
why it works
- Deciding loads without routing ignores how drop sequences change cost per shipment.
- Decomposing into assignment then routing keeps the problem solvable at daily scale.
- Inventory and due dates feed the model, so shipping decisions respect what's actually available.
what transfers
Loading and routing look like separate decisions but share one cost: optimize them together, and the same orders ship for less, as Webb Wheel's integrated approach did at 4.4%.
what came after
Webb Wheel ran the load-planning algorithm as its outbound planning process and reported 4.4% cost savings over the prior approach; the design was published as a case study in INFORMS' Interfaces.
references
- An Integrated Load-Planning Algorithm for Outbound Logistics at Webb Wheel
- An Integrated Load-Planning Algorithm for Outbound Logistics at Webb Wheel
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