Optimization of Transportation and logistics costs to maximize revenue and efficiency of supply chain

Abstract

Supply chain operations are perceived as total business operations for revenue generation. Various objectives like minimization of total operating costs, minimization of logistics & transportation costs, maximization of revenue etc forms the necessary pre-requisites for effective and efficient strategies in supply chain practices. But these are conflicting objectives if total efficiency and effectiveness of supply chain performance is to be achieved. Adhering to one strategy does not ensure perceived/improved performance of the supply chain. Therefore, all of such conflicting objectives are to be considered set wise to arrive at the total effectiveness of SCM practices. Supply chain optimization is the optimization using mathematical methods to ensure that the optimal operation of supply chains. Supply chain operations are optimized to minimize operating costs, minimization of inventories, minimization of operating expenses like inventory, transportation, manufacturing, distribution etc. and maximizing gross margin, maximization of revenue, maximization of return on investment. Supply chain operations are optimized to minimize operating costs, inventories, operating expenses like inventory, transportation, manufacturing, distribution, information sharing etc. and maximizing gross margin, revenue return on investment. These costs primarily vary from up-stream side to downstream side as the supply chain entities use customized information sharing facilities and technology. Supply chain optimization may include refinements at various stages of product lifecycle. Supply chain optimization problem is supply chain general problem, i.e. providing products and services to customers at the highest profit, but at the lowest price possible. In this paper, multi-objective optimization of logistics and transportation costs, operating costs and revenue is carried out with the application of Non-Dominating Sorting Genetic Algorithm (NSGA-II). These optimization results are used in decision making & strategy formulation to develop a cost effective operation of supply chain.