Strategic improvements for a wholesale trading company, focusing on logistics

Abstract

Melbro Holdings (Pty) Ltd., a South African wholesale trading company, house distribution centres throughout South Africa. Deliveries are made from four distribution centres to respective customers throughout Southern Africa. The company consists of six divisions, two namely being; JMC and Heneck Sacks. In this paper, these two divisions are investigated in order to make strategic logistical improvements to better the current situation. Recent sales agreements have been lost which has decreased the volume of goods that Melbro consolidate and deliver to customers. The current process is manual and together with this decrease in sales, has resulted in a low vehicle utilisation and unnecessary costs. This therefore has a major effect on the deliveries but yet no correction or investigation has been made. This document identifies how the typical vehicle routing problem together with shipment consolidation will be solved. As a first phase of the project, the problem aim and scope were identified to clarify the expectations and activities that need to be met. Hence, the key outcome of this project was identified as developing a generic tool for the company to determine the optimal consolidation and routing scheme for shipments. The second phase of this document includes literature review on three parts, namely; the Clustering Problem, Assignment Problem and the Vehicle Routing Problem. Typical industry applications of these combined problems were also discussed. The Analytical Hierarchy Process (AHP) was used to determine which software should be selected for the purpose of the tool. The AHP solution showed that MS Excel was the best possible option. The third phase of this document, explicitly defines how the model concept was developed from a “Systems perspective” as well as a functional perspective. The consolidation and routing tool was broken down into four particular parts: Data, Clustering, Assignment and Routing. Required information, mathematical models are outlined for Part 2, 3 and 4 of the model. Integration of the iii four parts is illustrated by means of inputs and outputs into each part of the model. A complete analysis on the flow of the system is also shown by using a Basic Flow Diagram. In the fourth phase, the physical model is discussed. A systematic approach was taken by using the principles of the model. Each MS Excel model tab is defined and clearly discussed with relation to the four parts already mentioned. The fifth phase discusses the results with relation to validation and testing, the case study comparison and implementation benefits that may be gained by use of the model. Finally, the last phase of this report, expresses the future recommendations that should be considered when implementing and working with this model on a daily basis.