Vehicle Routing with Shipment Consolidation

Abstract

The Vehicle Routing Problem with Split Deliveries (VRPSD) is a decision model that is increasingly used in practice to enhance the efficiency of last-mile distribution, an important task which all manufacturing, distribution, and retail firms must perform. In its current form, however, the VRPSD is missing an important cost saving opportunity by not allowing interactions among multiple vehicles that visit the same customer. In this paper, we introduce an extended version of the VRPSD, called the Vehicle Routing Problem with Shipment Consolidation (VRPC), a model that considers not only split deliveries, but also shipment exchanges (transfers) between different vehicles at certain customer locations (a process referred to as mid-route shipment consolidation). We conduct a series of numerical experiments, as well as a case study, to show that VRPC solutions match or outperform those of the VRPSD. Results indicate that up to 10 percent savings may be attained through the VRPC in lieu of the VRPSD, which implies that the efficiency of last-mile delivery may be improved by allowing mid-route shipment consolidation at select customer locations.