Planning Deliveries from the End to Begin: an Assessment Methodology Proposal for Big Cities in Developing Countries, with Real Case Application
Abstract
Delivering cargo in big cities in developing countries is more difficult than developed Country, mainly because the infrastructure and traffic condition are worse. Planning cargo distribution in urban area is an issue any way at all populous cities, but it is a critical problem in developing countries. The best technical option may be to use smaller and lighter vehicles in order to impact less the traffic, be more agile, save environment using less dirty fuel, and also can be easier to access central areas inside commercial centers. Costs, however, is a fundamental issue in this scenery; delivery cargo with a lot of small trucks can be much more expensive than full truck load using bigger vehicles, big trucks ask for space and the terrains values and traffic condition are not favorable for them. It may be important to find out solution to fit each case; but customized solution puts productivity down and impedes standard policies for cities and community; as well, will be a problem for multinational companies. The proposal of this paper is to present a methodology to apply an assessment before to choose the mode to delivery cargo in the urban area of populous cities in developing countries, thinking from the end of the delivery chain to begin, also brings an application in a real case. The target is to create a process to choose between conventional way privileging the agility, short storage and small trucks (planning having the commercial issue as the main focus); or to use cargo consolidation, less stops, and bigger trucks (logistic issue as the main focus).
Keywords: Logistic, Cargo Transportation, Urban delivery, traffic, planning.
1- Introduction
Cargo Transportation each day is more complicated than before, even more urban cargo transportation. Globalization has taken important increment in quantity of goods moved, it means additional quantity above vegetative grow; products are much more volatile, people are forced by marketing actions to consume more, to change concepts, fashion is quicker. More people more consume more transportation and same infra-structure; ate least the infra-structure grows less and less quick. In the third world, or developing countries, this situation is a huge problem, even more serious in big cities as Sao Paulo in Brazil
Big cities in developed countries have the same kind of issue, but the globalization, marketing, or quick fashion are not aggravated by economy grow or infra-structure investments shortage. Huge cities are so huge in Brazil as Japan , or Russia , Indian as USA
Today is an issue that becomes more difficult to live in a big city; transport cargo or people, or simple moving ourselves is expensive and takes a long part of our life. People and cargo compete for the same space on the streets, and they compete for the same space on the stores, competing also for the time.
The Urban Cargo Transportation has became more and more important because directly impacts in the life of the people and the traffic in the central regions (e.g. Lima Jr. [6]). This issue reaches Thirds Part Logistics with productive; the common people that must live with the trucks and their noise and pollution. The governments of majority of third world countries insist to try to fix the situation more with law and rules than infra-structure and planning; normally they only get more injuries to economy and business.
The Urban Cargo transportation at metropolitan areas can be analyzed per different focus: Third Part Logistic (3PL), or carrier, impacted by traffic, access difficulties and long lines to unload; cargo transportation users impacted by deliveries delays and freight costs; the people also by heavy traffic and pollution (noise and smokes). In another hand the Urban Cargo transportation is huge important for the economy even global also local business.
The players that really play this game are, normally, the 3PL carrier and shippers; the ones that buy goods and/or receive in their installations use do not play. The objective of this paper is to create a scenery where the buyer, or cargo receiver participate of the logistic planning and then works together in order to build a better logistic solution. It can be planning the cargo transportation in a customized way, from the end (receiver) to begin (shipper).
The proposal of this paper is to present a methodology to apply an assessment before to choose the mode to delivery cargo in the urban area of populous cities in developing countries, thinking from the end of the delivery chain to begin. The target is to create a process to choose between the conventional way privileging the agility, short storage and small trucks (planning having the commercial issue as the main focus); or to use cargo consolidation, less stops, and bigger trucks (planning having the logistic issue as the main focus).
The Methodology intends to support the decision comparing and recommending the best delivery logistic plan; also brings an application in a real case for global players that reach final customer with relevant aggregated value product.
The case studied in this paper and the database available offer a great opportunity for the development of a methodology capable of contribute to the framing of transportation planning considering the cargo receiver; as well to offer alternatives to mitigate Urban Cargo issues for its practical implementation of the Assessment, it also show a methodology applicable and the possibilities to help to avoid additional troubles to the cities and save money, without lost the focus in the environmental aspects.
2- Problem Characterization
Transportation is the most expensive part of logistic, it is a kind of consensus that 60% of the total logistic expenses come from transport. The international transportation is relative chipper than domestic transportation; and long distance dislocation also relatively chipper than urban delivery. Cargo Delivery Operation in urban and mainly in central areas inside commercial centre, is not only expensive, it is a problem.
It is urgent to consume, so the customer does not wait for the product whose could not pay for the transportation nor is simple delayed. Globally network must have an efficient local transportation solution. It is make no sense a lot of small trucks trying to access shopping centers at the same time; and competing with the cars customers, through over loaded streets; it means also more pollution. Usually, the logistic planning is done by the goods seller; it means:
1- The receiver (buyer or logistic final customer) asks for goods replacement based on his own forecast, inventory and available space;
2- The industry receives the order and starts his production forecast, asks for parts and raw material;
3- The industry dispatch the order to his 3PL, to his retailer, or directly to the receiver;
4- Goods are shipped to the receiver/store.
5- Thousands of small trucks are circulating right now inside the towns, and part of them to the same stores with same kind of products.
The best technical option may be to use smaller and lighter vehicles in order to impact less the traffic, be more agile, save environment using less dirty fuel, and also can be easier to access central areas inside commercial centers. Costs, however, is a fundamental issue in this scenery; delivery cargo with a lot of small trucks can be much more expensive than full truck load using bigger vehicles. Deliveries with big trucks ask for space and the terrains values and traffic condition are not favorable for them. It may be important to find out solution to fit each case; but customized solution puts productivity down and impedes standard policies for cities and community; as well, will be a problem for multinational companies.
There is not a definitive right option between makes deliveries through small or big trucks; the answer depends on the situation and focus.
If the planning starts as usual way: from the shipper to the receiver, is natural that the shipper makes all efforts to attend the customer expectation concerning locates the right good at the moment desired by this customer; in order to attend service level agreement the logistic chosen can not be the best possibility, it can mean more trucks, more pollution and traffic. In another hand, the customer maybe would not have enough satisfaction, if the shipper tries to optimize the logistic operation using less trucks, saving money and/or environmental.
Planning from the end, starting with the final customer, is to think the global necessity to attend a set of criteria; for example find out to replace the inventory of a sales sector for next period determinate (as informatics, or sportswear, etc). This way, the receiver will plan the logistic and the logistic process can be optimized without commercial damages; it can be a very good solution for big retailers, department stores, shopping centers, etc.
Nevertheless is not possible always to planning from the final customer view for a set of invoices; maybe because it is not big enough, or does not have variety of products that allows this kind of planning, or any other reason.
The challenge is to find a set of criteria to permit to decide which process is better. This paper presents a methodology to make an assessment to help to support the decision.
3- Study Proposal: Assessment Methodology to Plan Deliveries from the End to Begin
The focal point of this methodology is the fleet assignment; after determining the delivery planning and service level characterization in terms of shipment and receiving, the final product of this paper proposed will impact in the fleet to be assigned.
If the focal point is fleet assignment, the key is consolidation. In a few words: the point is to design cargo consolidation in between two alternatives:
- Consolidation pointing to region delivery – Planning from start (shipper) to end (receivers);
- Consolidation pointing to final receiver – Planning from end (receivers) to begin (shipper).
The methodology proposed can be summarized as follows, but the better understanding will come with real case application:
A fleet of different type of vehicles is available to be assigned to routes, each one has a given capacity, and each transportation request has the cargo amount to be loaded, the origin point and locations where it is to be delivered. Starting from a set of orders, the correspondent set of points has to be checked in order to satisfy transportation requests; those requisitions can be obtained applying the assessment. The main part of the methodology proposed is the assessment presented by figure1, as following:
Figure 1: Assessment for delivery mode.
Figure 2: Principles of Planning
This assessment application provides a score that indicates the possibility of delivery logistic being direct and exclusively, or make consolidated transportation to the customers (more than one) region. The score will be determined the track to support the decision about logistic planning. The planning requires much more than this step, but the score assessment will be support the decision before start to plan. In order to be able to deal with all these various complicating characteristics found in most part of final customers and keep logistics focus, planning has to be reformulated. The objective is to consolidate cargo at origin point, creating two kinds of loads: first one privileging the agility, short storage, small trucks and another one with logistic issue, regarding less stops and bigger vehicles. This methodology does not provide the planning, but a good indication to support the decision between the two options. In a very simple way, the figure 2 illustrates where planning has to be done from the end and who is responsible for.
The concepts to support this propose, are:
- Less transportation costs, reducing numbers of vehicle required;
- Reducing numbers of vehicle in each point of destination;
- Routing trucks deliveries;
- Saving environmental system.
4- Real Case Methodology Proposed Implementation
The case comes from a real application of DHL Exel Supply Chain in Sao Paulo , Brazil
Figure 3: City and customers profile.
Customers “A” were selected due to their shipment volume concentrate.
The Figure 4 presents the conceptual flow that illustrates the process of planning which support the assessment in order to decide to plan from the end to begin or not.
Figure 4: Conceptual flow
As proposed in this study, the assessment were applied to these “A” customers and the resulting score was 33, it means that possibly 33% of deliveries are going to be direct or exclusively, so the best logistic is consolidate (see figure 5). Some of them present a high frequency on orders, which can be explained by lack of space to storage cargo at stores, the area and inventory are too expensive. They are great drivers to start planning deliveries taking into account vehicle availability, because once the vehicle is assigned to them it is for sure that all constrains were submitted. Another advantage of planning from the end to begin is gain in transit time, about one day on short distance routes and three days on long distances. Talking about freight saving, it can reach 29%.
Time between orders and deliveries become smaller and customer service level is getting high, on the other side, for some final customers, there are so many restrictions that it seems to be the drivers for others customers cargo planning.
Figure 5: Customer “A” assessment
5- Conclusions
The study reached the target, first of all, the assessment were applied to two very different customer and the results were satisfied, one with best logistic delivery plan consolidate and the other one direct/exclusively (figure 6); then it was applied to customers “A” from automotive sector and the “new” ways of delivery were tested.
The planning project determinates time windows discharge restrictions and traffic conditions more rigid than before, orders have to be made earlier as possible; in fact the planning must be start on the warehousing picking phase.
The benefits results, in another hand, are relevant and can be summarized as followed, part of the results are not directly measurable, but perceptible:
- Value aggregated at deliveries, closeness to final customers and partnership. The final customers were much more satisfied with the logistic provider
- The primaries customers (the shippers) did not the costs increased and more satisfied with the satisfaction of their customers.
- Transit time would be reduced about 30% comparing to previous transit time (original planning), mainly because of the consolidation at origin.
- Trucks and Driver are dedicated (or partially dedicated) to the operation, so it means trucks optimized and drivers trained.
- Urban Constrains can be attended with specific actions without problems to logistic or commercial damages, because the planning is specific for this operation conciliate this constrains with the planning
- The transportation cost was reduced in 29%, and this saving was shared between the players.
Figure 6: Comparative consolidate & direct/exclusively.
The methodology works, and the benefits of planning from the end to begin are very important regarding: costs, service, and urban constraints attendance.
It is necessary, however, before to apply this concept to find out if the it is feasible or not, and this methodology paper proposal intends to support this decision.
If this proposal utilization shows a positive score to plan the delivery urban transportation from the end to begin, this concept is strongly recommended, once the benefits in terms of costs, service and traffic are very important for the logistic system and the society.
References
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- Tacla, D. Lima Jr. O. F., Botter, R.C. A Collaborative Transportation Proposal For Urban Deliveries: Costs And Environmental Savings, White paper, 2006.
- Tacla, D. Lima Jr. O. F., Botter, R.C. Suyama S. Planning a Good Logistic Net Working Design Can Save Money and Environmental for Urban Cargo Deliveries. White paper, 2007.
Cooperation:
Prof. Dr. Orlando Fontes Lima Jr, Universidade Estadual de Campinas, LALT
Suzi Suyama: DHL Exel Supply Chain, Brazil
Prof. Dr. Rui Carlos Botter.Universidade de São Paulo, Naval Department.