Network Mode Optimization for the DHL Supply Chain

Abstract

DHL Supply Chain North America moves more than 20 million packages each year. DHL transportation planners perform routing and cost-deduction tasks for many business projects. We refer to the associated planning problem as the Vehicle Routing Problem with Time Regulations and Common Carriers (VRPTRCC). Unlike ordinary vehicle routing problems, which use only a single type of transportation mode, our VRPTRCC applications include make–buy decisions because some of the package deliveries are ultimately subcontracted to organizations other than DHL. Time regulation means that the problem considers not only delivery-time windows, but also layover and driving-time restrictions. Our developed Network Mode Optimization Tool (NMOT) is an ant-colony optimization (ACO)-based program that aids DHL Supply Chain transportation analysts in identifying cost savings in the ground logistic network. By using the NMOT, DHL and its customers have saved millions of dollars annually. Also, the NMOT is helping DHL to win new customers against bidding competitors and reducing estimation times from multiple weeks to hours. The results show an actual increase in profits compared with the previous process by more than 15% through a combination of new projects enabled and reduced current operational costs. The NMOT is implemented and evaluated by using data from ongoing projects.