Article: The design of vehicle routes for a third-party logistics service provider using the simulated annealing algorithm Journal: International Journal of Business Performance Management (IJBPM) 2009 Vol.11 No.1/2 pp.1 - 18 Abstract: Increased globalisation and the subsequent competitive pressures have emphasised the importance of Third-Party Logistics (3PL) in managing logistics processes as well as customer and supplier relationships in logistics and supply chain management. Organisations can gain approximately 9% of saved costs and a 15% increase in capacity and quality, on average, through outsourcing their logistics activity to 3PL service providers. Transportation planning and management is a basic service provided by 3PL service providers with the goal to provide customer value in excess of their cost to serve customers. Since the transportation cost constitutes a significant fraction of the total logistics cost, 3PL service providers are motivated to improve their efficiency by ensuring on-time deliveries and pick-ups by designing least-cost routes with efficient routing strategies. In this paper, a Simulated Annealing (SA)-based metaheuristic algorithm was developed for and used by a 3PL service provider for the efficient routing of the vehicles for pick-up for an automotive parts manufacturing company. Inderscience Publishers - linking academia, business and industry through research

Title: The design of vehicle routes for a third-party logistics service provider using the simulated annealing algorithm

Authors: M. Raj Mohan, P. Shahabudeen, G. Kannan

Addresses: Department of Industrial Engineering, Anna University, Chennai 600 025, Tamil Nadu, India. ' Department of Industrial Engineering, Anna University, Chennai 600 025, Tamil Nadu, India. ' Department of Business and Economics, University of Southern Denmark, Campusvej 55, DK5230 Odense M, Denmark

Abstract: Increased globalisation and the subsequent competitive pressures have emphasised the importance of Third-Party Logistics (3PL) in managing logistics processes as well as customer and supplier relationships in logistics and supply chain management. Organisations can gain approximately 9% of saved costs and a 15% increase in capacity and quality, on average, through outsourcing their logistics activity to 3PL service providers. Transportation planning and management is a basic service provided by 3PL service providers with the goal to provide customer value in excess of their cost to serve customers. Since the transportation cost constitutes a significant fraction of the total logistics cost, 3PL service providers are motivated to improve their efficiency by ensuring on-time deliveries and pick-ups by designing least-cost routes with efficient routing strategies. In this paper, a Simulated Annealing (SA)-based metaheuristic algorithm was developed for and used by a 3PL service provider for the efficient routing of the vehicles for pick-up for an automotive parts manufacturing company.

Keywords: supply chain management; 3PL; outsourcing; third-party logistics; metaheuristics; simulated annealing; vehicle routing; transportation planning; transportation management; automotive parts manufacturing; automobile industry.

DOI: 10.1504/IJBPM.2009.023798

International Journal of Business Performance Management, 2009 Vol.11 No.1/2, pp.1 - 18

Published online: 12 Mar 2009 *

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Title: The design of vehicle routes for a third-party logistics service provider using the simulated annealing algorithm

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