Avoid the roadblocks on the way to optimization

By Nicolas Cano

Routing and shipping/scheduling overheads are a significant part of the operational costs of a company. The smallest improvement will have great impact on the overall company cost structure.

The deep understanding and implementation of city logistics techniques will improve overall company operations because it provides the basic framework for the sociocultural and economic activities of companies. The impact optimizes the distribution routes and the final product is an optimized business process for sales and warehouse activities.

City logistics is defined as: ‘the process of totally optimizing the logistics and transport activities by private companies in urban areas while considering the traffic environment, traffic congestion and energy consumption within the framework of a market economy.” [Eiichi Taniguchi et al. 2001]

Among the special characteristics of urban freight transport are two of particular relevance: its contribution to the traffic flows and the subsequent environmental impacts.
From a systems approach, city logistics systems have many components usually related to the stakeholders playing a role in the system. This article will focus on Shippers (for example, manufacturers, wholesalers, and retailers) operating from warehouses and/or cities.

Logistics Centers
There are certain areas where companies face issues that we intend to resolve by applying City Logistics.

• Efficient logistics systems – Just-In-Time transport systems
• Freight carriers – better services with lower cost
• Shippers – designated time windows; framework proposed to optimize your distribution routes

Components
In graph theory, the shortest math problem is finding a path between two vertices (or nodes). In the domain of city logistics, this math problem is applied to define the best route for delivering items to the consumer.

Dijkstra’s algorithm: It picks the unvisited vertex with the lowest-distance, calculates the distance through it to each unvisited neighbor, and updates the neighbor’s distance if smaller. Mark visited (set to red) when done with neighbors. [Dijkstra,1959]

Application of a Case
“In accordance with the requirements of customers, a logistics company transports a batch of fresh fruit from A City to B City. To maintain fresh[ness] and value, the fruit should be delivered to B city with the shortest time and optimal path. Based on Dijkstra’s algorithm, we can easily obtain the most convenient and efficient route incorporating all the cost of your distribution chain, and associated orders that make [for] efficient shipping if they are sent together.” [Liu Xiao-Yan et al, 2010]

NetSuite Implementation, from 10,000 Feet
To implement the solution in NetSuite we need to combine different sets of data during the sales process. As first steps, we have to evaluate the locations where each item is available, the possible shipping methods, the customer address, and the costs associated with my distribution center or third-party company. Traffic information (historical or real time) can be incorporated to improve route accuracy.

Once this information is gathered, an automatic process evaluates which orders can be sent in the same fulfillment, from which location, and using the particular shipping method that works better for that scenario.

All the information needed can be stored in NetSuite and can be easily updated whenever new data is available. We can group into three categories the reasons an organization delays its decision to implement a logistic optimization.

1) The manual process still works
Most companies’ shipping/warehouse departments can go right on doing things the old way. It may be wasteful, but they know how to get the job done, at least most of the time. The hairball starts when they deal with exceptions (special orders), human errors, or roadblocks during the sales/fulfillment process. This is when a proper protocol/system comes in handy. Cost-effective performance is out of the question in a manual system when compared to an automated one.

2) There are “special requirements” for what they do
NetSuite is a flexible system—a highly customizable and reasonably easy-to-extend enterprise resource planning (ERP) business platform. These core characteristics make the ideal platform for work in these types of projects. Even if the special requirements seem to be one-of-a-kind, the NetSuite platform will provide a way to satisfy them. Add a CL framework and the company is in great shape to tackle any logistic optimization needed.

3) IT Roadblocks
While adopting this framework and the systematization of the whole process, we can face a set of IT roadblocks. In the NetSuite world, these are easily bypassed as the typical routing software works with your customer and order data. These two critical resources for your company are available in a central data storage, your NetSuite account. A good routing solution is not a data repository, but rather a data appending process. Route and sequence data points are added to your order data with a delivery time and other route-based information.

This can be easily adopted using custom records related to address, product, customer, or just a particular order.

These new information sets will be the keys to unlock the possible optimization of your process. We can incorporate into NetSuite all the information provided by different carriers about routes, costs, and durations to let the system calculate accordingly. This information can be as unique as it is necessary because it can be extracted from the current shipping contracts or, in the case of private fleets, retrieved from the current logs, systems, or manual entries.

Summary
There are several routing and scheduling software products that offer the promise of route “optimization.” But the combination of the framework mentioned above and the NetSuite environment is a really interesting option to improve your company’s process and generate newer and higher standards for your services.

As guidelines to finally make the decision to improve your current process extending your NetSuite platform, think about the following.

a) Science is practical and right for your business, no matter the size.

b) Build business improvement, not just new shipping/distribution routes.

c) Optimization should be an ongoing process, not an event.

Take into consideration that ROI from these improvements will come in different forms: reducing total distance traveled and the associated cost; improving service performance; improving productivity; and dramatically reducing labor time in your company.

About Author

Nicolas Cano is the cofounder and CTO of Tavano Team, a NetSuite SDN partner specializing in NetSuite professional services. Nicolas has been providing NetSuite solutions since 2001.

The statements and opinions herein are those of Tavano Team and not of NetSuite. NetSuite has not verified any statements or claims herein and assumes no responsibility for such statements or claims.