Supply chain modelling using world leading software
A retailer was offering a home delivery service from stores nationally. Some stores used a van and others made use of local carriers and taxis. The type of service, productivity levels and costs varied between stores. We were asked to help to develop a service offer that would be keenly priced and available from all stores at all times of the year.
At the start of the project the client carried out a survey of current practices. A steering group and project team were then formed and we were selected to provide guidance and technical skills. A detailed sample of home deliveries was collected to provide a basis for modelling. In addition, a number of delivery rounds were examined in detail to derive road speeds and unloading rates. The Paragon route planning system was then used to model alternative delivery services.
A large number of Paragon runs were carried out to establish the difference in cost between the customer being allowed to choose the delivery day, rather than being told the day for their area, and different levels of activity. The process was then repeated using data from other stores with different geographic characteristics.
The modelling demonstrated that although allowing the customer to choose the day would be more costly, the premium was surprisingly small. Graphs were plotted to illustrate the sensitivity of the cost per delivery to the level of activity.
To ensure that the service could be supported at peak times, parcels carriers were
identified, so that if the work exceeded the capacity of the store's van the excess
could be dealt with in a reliable manner which maintained customer service. We also
established the level of home deliveries below which it would be cheaper to use a
parcels company rather than have a dedicated van. This enabled the project group
to implement a trial of the new service and to identify significant cost reductions
from re-