An Online Optimization Approach for Outbound Logistics
Burcu B. Keskin
We present an integrated model for simultaneous optimization of the loading and routing decisions associated with an automotive supplier's outbound supply chain. The supplier observes and fulfills demand in an online fashion. Given limited inventory, the supplier combines these orders into loads, releases them based on various dispatch criteria (e.g. truck-utilization, route-utilization, or penalty-based dispatch policies) and due-date considerations, and ships them in truckloads, less-than-truckloads, and containers. Dynamically changing demand information, inventory rationing, inventory interactions among orders, and lead-time considerations are some of the challenging aspects of the problem. Considering both a decomposition-based heuristic and a reduction-based exact approach, we determine transportation mode and carrier choices, ration inventory, and route orders while considering total cost minimization. The heuristic approach decomposes the problem into assignment and routing components following a cluster first-route second logic. On the other hand, due to the newly developed problem size reduction techniques, the exact approach is solved via an off-the-shelf optimization engine. A scalable database with a graphical user interface supports the optimization algorithms. We test our algorithms using four months of real data from the supplier and compare it to their real life practice. Our results demonstrate the impact of transportation mode-specific capacities, customer locations, inventory availabilities, and due- date restrictions on outbound logistics costs.
Burcu B. Keskin is an associate professor of Operations Management at the University of Alabama. She earned her Ph.D. in industrial engineering from Texas A&M University in 2007. She has conducted research in different areas of supply chain management including inventory theory, facility location, network design, and vehicle routing with a particular emphasis on applied optimization. She has obtained funding for her research through the University Transportation Center for Alabama grants and several companies. Her publications have appeared in several OR/OM journals including Naval Research Logistics, IIE Transactions, Computers and Operations Research, European Journal of Operational Research, Journal of Operational Society, and Interfaces. Dr. Keskin serves in the editorial boards of Handbooks in OR/MS; International Journal of Operations Research and Information Systems; and International Journal of Integrated Supply Management. She is also an ad-hoc reviewer over ten journals. Dr. Keskin has offered courses on operations, supply chain logistics, inventory management, and nonlinear and discrete optimization. She is the recipient of 2014 Culverhouse Board of Visitors Teaching Award. In addition to her scholarly activities, Dr. Keskin is an active member of the INFORMS, DSI, and POMS. Dr. Keskin is the Treasurer and Vice President of Tuscaloosa Region, INFORMS Deep South Chapter. Dr. Keskin was an elected officer (secretary and president) of INFORMS Junior Faculty Interest Group from 2008 through 2011. Dr. Keskin is the faculty advisor of the INFORMS Student Chapter at the University of Alabama. Due to her involvement with student chapters and fora, Dr. Keskin was a recipient of the INFORMS Judith Liebman Moving Spirit Award in 2007 and INFORMS Fora Moving Spirit Award in 2013.