The Impact of the Handling Unit on Logistics Costs: The Case of a Portuguese Food Retail Supply Chain

Abstract

In the food retail industry, the agility and responsiveness of the supply chain are crucial because demand is volatile and short lead times are mandatory. The logistics performance is of critical importance to provide a high level of efficiency in operations and a high degree of customer satisfaction. The Handling Unit, or the minimum quantity to send to retail stores (the ship-pack), is a factor of considerable influence on logistics efficiency and costs. In this work, it was developed a simple analytical cost model for a Portuguese food retail two-tier distribution system (distribution centre and store) to support the evaluation of the conversion of the handling unit to half-pallet. The results of the model, considering a pilot study with three scenarios, suggest an economic gain of approximately 75% (comparatively to the current situation) in logistics costs. These quantitative results were decisive to guide decision-makers.