Studia Mundi - Economica Vol. 2. No. 2.
(2015)
ROUTE PLANNING OPTIMIZATION PROBLEM AT A LOGISTICS COMPANY
(1) Kinga Lepsényi, (2) Mónika Pónusz
(1)
Logistics Management (MSC) Student, Szent István University, Faculty of Economics and
Social Sciences,
(2)
College Professor, Tomori Pál College,
Abstract
A 21th century company's main goal is to increase their income and decrease their expense,
even so they give great attention to social responsibility, the protection of the environment and
other factors, because if does not prospers the company, then it cannot properly strive for their
goals. In the light of the current keen competition on the market is essential to minimize the
expenses. In the case of a logistics company one of the most determinative cost is the shipping
related expenses. To minimize the amount of money spent on shipping a good solution can be
the fuel cost reduction.
In this study I aimed to minimize the fuel consumption with the optimization of routes. To find
the best possible solutions I chose the LP Simplex method, using a highly beneficial add-on of
Microsoft Excel called Solver.
Keywords: cost optimization, route planning, fuel minimization, Solver, LP Simplex method
JEL classification: R41
Introduction, actuality of this issue, raising questions
One of the 21th.century’s frequently mentioned and determining factor is the consumer society.
The dynamism of the economy, the continuing technological development and the fact that the
geographical distances are bridged by the information technology make the trade almost
borderless. Our life is being assisted by newer and newer fast advancing devices, which can be
used in many parts of our daily life. For a long period only the positive consequences of the
ongoing development and globalization was mentioned. However, in the last decade more and
more recognized their disadvantages too. The rapid technical development, the shortened
product lifecycles result an increasing volume of waste. Which often threatens the environment
and the human health, because of the modern (and mostly artifical) materials.
From my point of view the current use of non-renewable resources, in the light of the gradually
resources increased caution because, according to the recent studies, our oil supplies are limited,
which will have foreseeable consequences, so the optimization of shipping is not only important
because of its cost-effectiveness but also in the aspects of environmental awareness.
The importance of this issue is further strengthened by the fact ‘... the interpretations of complex
systems’ processes are not always coherent, moreover the results are not always consistent
either. The internal operation of the systems and the prediction of the critical factors' which
have significant effects on the results can be difficult for a number of reasons, therefore the IT
- system of decision support is not satisfying, despite the fact that it could be useful in many.’
(Gyenge-Kozma, 2015)
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Through mathematics difficult and complex economic problems can be solved. In my study I
would like to explore the possibilities of a hazardous waste transport and disposal company's
transportation and development cost-optimization with mathematical methods of decision-
making and Operations Research.
Materials and methods
The analysis in this study was solved by using of operation research based on Ferenczi et al.
(2002). The calculations used in the optimization were made based on the company's and the
competitors’' public data. I solved the cost optimization with a routing process using the Excel
add-on called Solver, applying the LP Simplex method.
Route planning optimization problem by a logistics enterprise
A firm concerned with transport of dangerous goods wants to minimize their transportation
costs. By examining the data from the company management has concluded that one way of
minimizing costs is, to optimize the distance traveled by the vehicle, so a route must be
determined in which vehicles take the shortest path between the stations. To solve the
optimization's process I chose an add-on of Microsoft Excel called Solver and the LP Simplex
method. One great advantage of the computerized solution is that it simplifies the calculation
tasks in a way that manual counting becomes completely unnecessary. So it calculates the given
objective function and the associated solutions extremely fast.
The investigated problem is that we must go through from the departure site, all Hungarian site
of Lukoil network with using the available vehicle fleet and human resources. The hazardous
waste must be transported to the appropriate site, then the vehicle must be returned to the
departure site.
To transfer the problem into an Excel table I need the following data:
addresses of the vehicle’s starting and ending location
addresses of the delivering sites of Lukoil network
the amount of hazardous waste which needs to be transferred from each delivering site
addresses of the operating locations
the purchase prices (/kg) of the operating locations
the cost of transporting vehicles per kilometer, which I determined as 228 HUF/km
based on preliminary studies
Let’s assumed the following: firstly, the hazardous waste is delivered with a vehicle which has
infinite capacity, so it can transport any number of goods at the same time, secondly we can
take waste from more transfer destination, without dropping off the first shipment to the
recipient site, thirdly for every transfer destination there is only one recipient site to where
transfer is possible, and finally it is possible to transport any number of goods to the receiving
destination. However we cannot take into account the toll, driving time requirements and
consumption data.
To handle the volume of the data I divided the national Lukoil filling station network into 3
different regions, so having a region of western Hungary, eastern Hungary and Budapest. I
restricted the further analysis to the western Hungarian region which region contains 24 Lukoil
filling stations (transferring station) and 6 operating stations (receiving station).
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In all cases I included the receiving station of RewoxHungáriaLtd.'s in Szentes even though it
is located in the eastern part of Hungary, because I'm curious that under what price and distance
circumstances they would transport hazardous waste to the hazardous waste station in Szentes.
We can achieve the minimization of cost in two major steps.
First, we should determine the ideal recipient site for every transfer site. The goal is to deliver
the given amount of hazardous waste to the receiving station where they take the waste over in
the best price and as close to the transferring station as possible. The process is illustrated by
the Figure 1.
Figure 1. Interpretation of Assignment Matrix
Source: own construction
Once we have this matrix, we need to define the objective function, which in this case is to
minimize the cost of whole transportation task. To determine the objective function we need to
use the following formulas:
transporter vehicles' cost/km * (1. Table’s and 2 Tables sumproduct) + 3. Table’s sum
In this case the objective function is 2,618,825 HUF, this is the lowest cost, which is enough to
transport the hazardous waste from every transfer site to a waste station. (Figure 2)
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Figure 2. Interpretation of Assignment Matrix
Source: own construction
In this case the following correlations were diagnosed between the 24 transfer sites and the 6
recipient sites, so we can see which recipient sites are the best matches for every transfer sites.
In the 2nd Figure 1 means that the delivery is created and 0 means that it does not.
So the procedure described above can be interpreted to solve any routing problem for the
transport of any kind of goods. The point is that we got the route, which allows the company to
minimize shipping cost.
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Studia Mundi - Economica Vol. 2. No. 2.(2015)
Figure 3. AssignmentMatrixinthe Western region
Source: own construction
As we can see in the Figure 3 every transfer site has exactly one recipient site where the wares
are shipped to. It means the first problem is successfully solved. Based on the calculations 4
single centre tours generated which are the following:
1. single centre tour: LukoilAbda –
Ltd.
2.
3. single centre tour: LukoilBalatonakarattya – LukoilBátaszék – LukoilDunaföldvár –
LukoilFülöpszállás – Ltd.
4. Star tour: LukoilBalatonkeresztúr – LukoilBöhönye – LukoilGalambokDél –
Lukoilsinglecentre tour: – LukoilMecseknádasd – LukoilMohács – LukoilNagykanizsa
– LukoilPacsa – LukoilPécs I. – LukoilPécs II. – LukoilSármellék –
LukoilZalaegers -Marcali Ltd.
The second step is to determine how we can further reduce the costs of the transports. This
means we have to determine the shortest route during the single centre tour. I will present this
process in the 4 case of the 4thsingle centre tour.
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The task is to find way to transfer the single centre tour into a ringroad. So it will take less km
to deliver the materials to Saubermacher-Marcali Ltd.
A traversal method should be developed so that the departing and arrival station need to be the
Rewox Hungária Ltd. site in Szentes, we should only stop once at every 13 transferring stations
and the hazardous wastes must be delivered to the recipient station of Saubermacher-Marcali
Ltd. The goal is to determine the objective function, what can minimize the kilometers traveled.
Determining the objective function:
4th. Table’s and 5th. Table’s sumproduct
Figure 4: Interpretation of Assignment Matrix
Source: own construction
In this example the object function is 658 km, so the shortest distance between the sites that
have to be visited is 658 km.
The Figure 5. shows the order in which the transport must be carried out. The table above
displayed on the map shows, that the shortest way can be achieved with the vehicle traveling
around the locations in 2 separate roundroad.
If we improve this solution further with a heuristic way we can get the route which is really the
most cost-effective. Among other things, this is the reason why there is a great need for an
experienced logistics specialist’s knowledge, because the computing solution often cannot
accurately model the reality. I present the manually corrected tour on the map below.
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Figure 5: Roundroad
Source: own construction
Conclusions and recommendations
In my study I concluded that a firm concerned with transportation can achieve cost reduction if
it can find the best tour with the suitable route planning process. As a result the shortest route
can be realized. In addition, it was found out that there is need for a professional’s knowledge,
even if we use a computerized solution, as they might need of his heuristic correction.
Referens
1. Benkő J. (2000): Logisztikaitervezés, Mezőgazdaságialkalmazásokkal, Budapest,
Dinasztia Kiadó, 199 p.
2. Csath M. (szerk.) (1972): Operációkutatás, Budapest, Számítástechnikai Oktató
Központ, 576 p.
3. Csernyák J. – Jánosa A. (2004): A gazdaságioptimalizálás módszerei II., Budapest,
Nemzeti Tankönyvkiadó, 227 p.
4. Ferenczi Z. – Jámbor A. – Nagy Z. – Raffai M. (2002): Döntéselőkészítés
Esettanulmányok, példatár, Novadat Kiadó, 102 p.
5. Gyenge B.–Kozma T. (2015): Szimulációsmodellezés a raktárlogisztikában. In:
Karmazin György (főszerk): LOGISZTIKA Trendek és legjobb gyakorlatok, I.
évfolyam, 1. szám, Szolnok, 2015. április, 22-24. oldal, ISSN: 2416-0555
6. Mosonyiné Ádám G. (2008): Inverz logisztikai láncok működése és optimalizálási
szintjei, In: EU Working Papers 1/2008, p. 117-130
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