Emphasizes the importance of the awareness of visit frequency savings potential.Agribusiness,

Robbins, Lynn W.

English

Research Papers in Economics

COST REDUCTION CONSIDERATIONS FOR
PEDDLE-RUN DISTRIBUTION SYSTEMS
by
Lynn W. Robbins
Department of Agricultural Economics
University of Kentucky
Lexington, Kentucky
Emphasizes the importance of the
awareness of visit frequency savings
potential.
Maintaining cost effectiveness where
nonhomogeneous products are being supplied
to a number of locations from one-carrier
routes is among the most difficult pro-
blems in distribution management (2,3,4).*
For example, attempts to enhance truck
capacity utilization are frustrated by
concurrent needs to maintain order integ-
rity, to meet delivery schedules, and o
provide an adequate level of services.$
For a given time interval, demands may
range from multiples of one truck’s
capacity to very small fractions thereof,
New employees find that learning the art
of carrier loading is difficult if not
impossible. Products are damaged and
individual orders must be resorted at the
delivery point due to improper loading
practices. In essence, any thought of
implementing potential cost reduction
techniques are tempered by the possib-
ility that they might fail and are further
tempered because costs may even be in-
creased (1, p. 51).
Typically, in a situation where
many retailers are served by one ware-
house the routes are determined according
to carrier capacity, road miles, and
retailer demand for a week (or other
regular interval) (3). The weekly route
structure is then followed religiously
until demands on any one route increase
beyond truck capacity, until new
retailers enter, or until old retailers
leave the system. Once route restruc-
turing is required the initial process
is repeated with all or more than likely
a small part of the affected retailers (5).
The objectives of this study are:
1) provide insight into safe cost reduc-
tion techniques; 2) the load-size/loading-
time trade-off is presented to demon-
strate how it is that greater capacity
utilization is not always desirable and
3) determine potential cost savings from
determining visit frequency within a
distribution routing analysis rather
than accepting it as given.
Capacity Utilization Considerations
Carrier capacity utilization is
crucial to peddle-run management once a
particular sized carrier is assumed. In
situations where a choice of carrier
capacities exist the following sugges-
tions can be utilized iteratively to
estimate peddle-run distribution costs
for each size carrier being considered.
Estimates for each capacity are essential
because implications from considering
the interactions between loading produc-
tivity, capacity utilization, and visit
frequency cannot be generalized across
capacities. In fact, it is conceivable
that two firms utilizing equal capacity
tractor trailers could easily exhibit
different average
different product
or Combinations.
load size because of
densities, bulk, shape
Journal of Food Distribution Research September 78/page 3The need to understand the relation-
ship between average and maximum capacity
presented itself in a recent research
(5). Apparently, dispatchers regularly
underutilized
Curiosity as
such capacity
importance of
trade-off.
their cubic truck capacity.
to the motivation behind
utilization revealed the
the load-size/loading-time
Consequently, capacity utilization
was studied in a sensitivityanalysis to
evaluate the trade-off between loading
time and average load-size. Loading
times and therefore costs increase more
than proportionately as load-size (LS)
increases for a given carrier capacity
(cc) . More and more time and expense was
incurred in the loading effort as larger
and larger proportions of the tota
J capacity were utilized (Figure 1). ‘
In other words, as the LS/CC ratio
increases, the loading time and there-
fore the loading cost (LC) increases more
than proportionately. The cost in time
spent loading carriers must be offset by
the number of’visits that can be made with
each carrier per trip. The more avail-
able capacity utilized the more visits
each carrier can make per trip, the lower
the total system’s delivery cost (DC).
Total systemts distribution costs (TC)
where TC = LC + DC, might be reduced by
increasing the number of trucks (routes)
if the subsequent decrease in LC is
greater than the increase in DC.
The study firmts management was add-
ing a route to a weekly distribution sys-
tem despite an average carrier utiliza-
tion of less than 50 percent in cubic
measure. The transportation manager
justified the added route in terms of
loading times. Given that managers may
tend to turn first attention to what cur-
rently seems to be their most troublesome
areas, it is likely that the firm’s
distribution situation had proceeded to
the right of point b. in Figure 1 before
the need for change was realized.
Further firm-level research on this
aspect of the problem would likely pay
high premiums to decision makers. Itera-
tive capacity manipulation allowed for
load-size/loading-time trade-off analysis.
The question of what should be done
with dealer demands that are greater than
carrier capacities is usually solved by
forcing round trips to the applicable
dealers. However, forcing round trips to
dealers with demands greater than the
carriers capacity may not be ideal as
only the residual demand is treated by
the actual route structuring portion of
the exercise. Total costs may be min-
imized if the large dealer’s demand is
parceled out to two or more nearby routes.
Visit Frequency
Implicitly, most distribution rout-
ing schemes, including computerized
routing models, assume a given visit
frequency. Demand expressed as daily,
weekly, or monthly dealer requirements
forces daiiy, weekly, or monthly delivery.
Manipulating visit frequency is likely to
reduce cost over a solution that requires
uniform regular delivery.
Frequency manipulation is at least a
potential for savings through distribution-
routing. A sample problem is presented
in Figure 2. The shortest route (OACBO)
covers 180 miles for each time period,
one week, for example. If however, point
C could accept less frequent visits, say
once every four or eight weeks, adding
C to the weekly route would be sub-
optimal.4 In this particular example,
up to two round trip deliveries to C
would be less expensive than including C
in the total route every week. (Table 1
and Figure 3). In an actual situation,
less frequent visits to C might allow
less frequent visits to the remaining
points in the main route and therefore
reduce costs. Replacing less frequent
September 78/page 4 Journal of Food Distribution ResearchAverage loading and delivery
cost per carrier )
c /
/
‘\~ /;
1’ \
\ / /
Average delivery /
cost per carrier ‘—--_,
for all routes /
/
/ Average loading
/
/
/ ‘R
cost per carrier
per trip /
//~ +
./--
Percent of Total Cubic Carrier Capacity Utilized
Figure 1, Hypothetical relationships between loading and
delivery cost per carrier trip as they relate to
degree of total cubic carrier capacity utilization.
Journal of Food Distribution Research September 78/page 5Table 1.
0
Pi = Plant i where i = O, A, B, and C
@ = Distance between points
Figure 2. Location of points for sample problem.
Sample problem’s trade-off between separate round tr s, less frequent visits,
3 and equal visit frequency to C in miles traveled per onth.
Visit Frequency Per Month
Route Stop Sequence* Total
Routing OACBO* OABO QCO Travel per Month
Plan to c (185 miles) (135 miles) (100 miles) (miles)
1 4 4 0 0 740
2 3 3 1 0 690
3 2 2 2 0 640
4 1 1 3 0 590
5 0 0 4 0 540
6 4 0 4 4 940
7 3 0 4 3 840
8 2 0 4 2 740
9 1 0 4 1 640
*Route mileage given in parentheses.
**OACBO is the route made up of PA, Pc, PR, in that order, originating and ending at
PO. Similarly OCO just includes Pc and OABO includes PAPB.
September 78/page 6 Journal of Food Distribution Research1
b
660
L
/
/ ,0
580 0 0
1’
/
0
/
/
/ All points included in
/
/
weekly route OACBO
3
/
0
/ .“\
Weekly OABO route with
separate round trips toC
500
[
I
Weekly OABO route with C
included, OACBO less frequency
420
1 1 I I
o I 2 3 4
Visits to C per month
Figure 3. Sample problem’s trade-off between separate round
trips, less frequent visits, and equal visit
frequency to C in miles traveled per month.
r
Journal of Food Distribution Research September 78/page 7round trips to C with occasional full
route trips whenever possible, e.g. OABO
three times per month and OACBO once per
month, ,saveseven more travel (Table 1
and”Figure 3).
~~An immediate solution to the visit
,frequency opportunity area is not appar-
,ent. For small problems or even large
problems where only a small portion of
the dealers “exhibitirregular demands,
frequencies might be established easily
by inspection. The difficulty is in con-
ceptualizing large problems.
,,.
One~,possiblesolution would require
a’three-stage approach. The first stage
would aggregate dealers with similarly
sized demands, geographically. The
second would assign visit frequencies
and the third would establish routes for
each frequency. For example, if twenty
dealers were to be visited once, thirty
dealers twice, and fifty dealers four
times per month, three routings would be
required. One sequencing would be
established for the two weeks that only
fifty dealers were to be visited. An-
other sequencing would be required for
the one or.two weeks that eighty or more
dealers were to be visited. The final
routing would be for the one week that
carriers visit ninety or one-hundred
dealers.
Conclusions and Recommendations
h aware peddle-run management team
should analyze the trade-off between
load size and loading time. Average
carrier capacity parameters should be
iteratively searched until the most ef-
ficient load size, in total systems’
terms, is discovered. This approach
avoids the pitfalls of the usual assump-
tion that more complete carrier capac-
ity utilization is better by directly
evaluating the load-size/loading-time
trade-off.
Research into additional possibi-
lities is necessary to establish guide-
lines for parceling out a dealerls
demand to two or more multiple-dealer
routes when that demand is greater than
the carrierrs capacity. The general
practice in such cases may be too
restrictive in that round trips to re-
duce the demand to less than one carrierts
capacity are usually forced into the
solution.
Similarly, the entire notion of
visit frequency has been essentially
ignored by practitioners. The assump-
tion that all dealers will be visited on
a regular interval basis is often injected
into routing analyses without inspecting
the implications. The sample problem
demonstrated potential savings if regular
time interval visits are not required and
assumed.
The central issue is not determining
what aspect of the frequency question is
most important to routing research. The
central issue is to provide an awareness
of visit frequencyls savings potential.
More researchers and decision makers are
likely to explore whether sufficient
returns exist from frequency considera-
tions if they are generally more aware
of the possibility.
Until a computer routing scheme
becomes readily available that will deter-
mine visit-frequency internally, visit-
frequency allocation decisions must be
made externally. Because current com-
puter algorithms that exclude frequency
considerations do as well or better than
manual routing schemes, (5) it must be
assumed that either apparent conceptual
advantages of frequency allocation do not
exist, or else managers have overlooked
a large potential source of transporta-
tion cost saving. More investigation is
needed. More awareness should motivate
more investigation.
September78/page 8 Journal of Food Distribution ResearchFootnotes References
1
A peddle-run refers to a series of small
orders that are delivered to a number of
locations by one truck. The distribu-
tion system is therefore made up of a
number of,these one-truck routes.
%ere level of service refers to the
speed with which back orders are filled.
Normally, level of service includes the
number of unfilled orders as well as the
speed with which they are filled. The
more restrictive definition is required
here because carrier capacity utiliza-
tion conflicts only with the need to
fill back orders promptly.
3The cost relationships shown in Figure
1 are general and are presented for ease
of conceptualization. The functions
continuity and inflection point loca-
tions are not intended to reflect one
specific situation, only general
i
relationships.
4The weekly frequency is simply assumed
as a starting point for this discussion.
Any other interval and its multiples
would yield the same relative results.
I
1. Bloom,Gordon F. Productivity in the
Food Industry. Cambridge,
Massachusetts: MIT Press, 1972.
2. Clarke, G. and J. W. Wright.
“Scheduling of Vehicles from a
Central Depot to a Number of
Delivery Points.” Operations
Research. 12:4, pp. 568-581,
July, August, 1964.
3. Dantzig, G. B. and J. H. Ramser.
“The Truck Dispatching Problem.”
Management Science. 6:l,pp. 80-
91, October, 1959.
4. Hallberg, M. C. and W. R. Kriebel.
Designing Efficient Pickup and
Delivery Route Systems by Coxiuxter.
Pennsylvania State Agr. Exp. Sta.
Bulletin #728, June 1972.
5. Robbins, Lynn W. “A Modified Lockset
Approach to Routing for Baikhatii ‘
Effectiveness,” Staff Paper s2,
University of Kentucky, College of
Agriculture, July, 1977.
Journal of Food Distribution Research September 78/page 9

COST REDUCTION CONSIDERATIONS FOR PEDDLE-RUN DISTRIBUTION SYSTEMS

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics