Solution approach to incompatibility of products in a multi-product and heterogeneous vehicle routing problem: An application in the 3PL industry

Abstract

Vehicle Routing Problem (VRP) is an extensively discussed area under supply chain literature, though it has variety of applications. Multi-product related VRP considers about optimizing the routes of vehicles distributing multiple commodities. Domestic distribution of goods of multiple clients from a third-party logistics distribution center (DC) is one example of such an application. Compatibility of products is a major factor taken into consideration when consolidating and distributing multiple products in the same vehicle. From the literature, it was identified that, though compatibility is a major consideration, it has not been considered in the literature when developing vehicle routing models. Therefore, this study has been carried out with the objective of minimizing the cost of distribution in the multi-product VRP while considering the compatibility of the products distributed, using heterogeneous vehicle types. The extended mathematical model proposed has been validated using data obtained from a leading 3PL firm in Sri Lanka which has been simulated using the Supply Chain Guru software. The numerical results showcase that cost has been reduced when consolidating shipments in a 3PL DC. The study will contribute to literature with the finding that the compatibility factor of products can be considered when developing vehicle routing models for the multi-product related VRP.