Vehicle Routing

Clarke & Wrights

Solution: Sequential Algorithm
Milk Run
 Applications
• Inbound Transportation :
– Collecting and bringing milk from villages to the milk
processing center.

– Collecting components from suppliers and bring them

to engine and vehicle assembly.

• Outbound Transportation :
– Fulfilling customer demands from the warehouse or
distribution centers.
 Milk Run Advantages
• Pressure to reduce inventories

• Quality Improvement

• Pressure to improve time required for order

fulfillment
 Vehicle routing problem (VRP)
• A set of customers their demands and a central depot

• A set of vehicles, located at the depot

• Design minimum cost routes visiting all customers

Objective

 minimize the total distance (or time) travelled (this typically corresponds to variable cost)
 Vehicles Constraints

Each vehicle has a limit (capacity - Each vehicle has a maximum total
usually weight and/or volume) on working time from departure to
the goods carried arrival back at the depot

Customers Constraints

Each customer has a certain quantity which has to be Each customer has a number of time periods during which
delivered (and/or collected). delivery (and/or collection) can occur

Other factors

Multiple trips by the same vehicle on a single day, where Trips by the same vehicle longer than one day (i.e. with
the vehicle returns to the depot and then goes out again. overnight stops).
Can it be formulated as mathematical
Program ?
• It becomes integer sometimes non linear
integer program.

• Difficult to solve using optimization software

for practical problem sizes

• What could be done

 Savings Algorithm to create vehicle routes
Da  coi  cio  coj  c jo
Db  coi  cij  c jo
Sij  Da  Db  coi  c jo  cij
Step 1: Calculate the savings S (i, j ) = d ( D, i )  d ( D, j )  d (i, j ) for every
pair (i, j) of demand points.
Step 2: Rank the savings and list them in descending order of
magnitude. This creates the "savings list." Process the savings list
beginning with the topmost entry in the list.
Step 3: For the savings under consideration, include link (i, j) in a route if
no route constraints will be violated through the inclusion of (i, j) in a
route
Step 4: If the savings list has not been exhausted, return to Step 3,
processing the next entry in the list; otherwise, stop: the solution to the
VRP consists of the routes created during Step 3. (Any points that have
not been assigned to a route during Step 3 must each be served by a
vehicle route that begins at the depot D visits the unassigned point and
returns to D.)
 Computing savings for link (Karina –
Rubdi) :12-18
• Distance from Dairy to Karina ( 1-12) +
distance from Dairy to Rabdi (1-18) – Distance
between Karina and Rabdi (12-18)
• =
• 39.3+ 29- 10.3 = 58 KM
 Lotus Dairy – Pilot Study to apply savings
algorithm to create vehicle routing
• LOTUS DAIRY has a network of more than 1500 village milk procurement centers and a proud owner of
loyalty of more than 1 lakh primary milk producers of Rajasthan.

• Processing of milk is controlled by process automation by state-of-the-art technology.

• Currently, it markets milk in poly-pack, cow and buffalo milk in bulk, Ghee, Dahi, Chhach, Lassi and flavored
milk in suitable consumer packs under brand name LOTUS.

• It has a network of 2500 shop agencies, Lotus Shoppe’, Lotus Star shoppe’ and Lotus Parlors in Rajasthan.

• Currently, it has 7 chilling centers where about 7,00,000 litres of milk is collected everyday

• About 4.5 lac liters of milk is sold to companies like Nestle , Modern Dairy, DMS, Mother dairy while the
remaining 2.5 lac liters are packaged and marketed under brand LOTUS
 Problem Statement

 Milk is collected from about 1500 villages in and around Jaipur and transported to the chilling centers.
The company uses trucks which carry insulated cans from villages to the chilling centers.
 The company is currently incurring a inbound transportation cost of about Rs 0.80 per liter of milk.
This cost rises to about Rs 1.15 per liter in summers due to low milk production.
 Given that the cost of milk sold in the market is about Rs 25 per liter, the transportation cost is a
major concern for the company.
 As of now the company does not use any software for vehicle routing. This task is totally done
manually.

Vehicle Details Payment Terms

• Start Time : 5:00 am

• End Time: 9: 00 am Total rate payable per trip
Flat rate of Rs 200 per trip
• Average Speed: 40 Kmph + Variable amount based on the distance
• Vehicle Capacity (SFC 407 Turbo Truck from travelled
Tata) The total distance travelled in the
– Total number of insulated cans per truck = 50 trip is noted down
– Volume of each can = 20 litre Mileage of truck = 10 km/litre
– Total truck capacity = 1000 litre
Rate diesel rate = Rs 37/ litre
Input Data
 i j Sij Dist
12 18 58 10.3
3 18 56.6 12.3
10 11 51.2 4.2
11 16 50.8 3
11 18 50.5 16.2
12 16 50.3 5.1
16 18 50.3 15.4
10 16 49.4 5
11 12 48.3 8.1
10 12 46.8 10.2
10 18 46.8 20.5
18 22 45.4 16.7
3 22 44.7 7.7
3 12 44.5 14.1
12 22 43.5 8.3
5 10 43.4 6.3
8 18 42.3 18.2
8 16 42.2 5.4
8 10 42.1 7.1
8 12 42.1 8.1
8 11 42.1 6.5
5 11 40.9 8.2
5 12 39.6 11.1
5 8 39.5 3.4
5 16 39.5 8.6
3 20 39.1 10.7
 Computing savings for link (Karina –
Rubdi) :12-18
• Distance from Dairy to Karina ( 1-12) +
distance from Dairy to Rabdi (1-18) – Distance
between Karina and Rabdi (12-18)
• =
• 39.3+ 29- 10.3 = 58 KM
 Construction of Route
Step Link route Open Load Unused capacity
selected nodes

1 12-18 12-18 12,18 =120+ =1000-400

280=400 = 600
2 3-18 12-18-3 12,3 =400+220 = 1000 -520
=620 = 380
3 12-16 16-12-18-3 16,3 =620+80 = 1000 – 700
= 700 = 300
4 10-16 10-16-12-18-3 10,3 = 700+260 = 1000-960
=960 40
We stop as no open node link has demand less than 40
Our First Route : 1-10-16-12-18-3-1
 Truck
Saving's Algorithm Load Distance Time Cost

(in Kms) (in hrs) (in Rs)

10 16 12 18 3 960 90.3 2.66 534.11
6 22 8 11 5 13 14 1000 81.5 2.45 501.55

4 17 15 7 9 19 1000 107.1 3.09 596.27

20 2 21 520 69.7 1.95 457.89

Total 3480 348.6 2089.82

 Results
Transportation
Savings (in Rs/litre) Savings (in %ge)
cost(Rs/litre)
Existing Inbound transportation cost to
0.80
company

Saving's Algorithm 0.60 0.20 24.93%

 Lotus Dairy processes about 7,00,000 litres of milk collected from about 1500 villages every day.
 The total inbound milk transportation cost spent is about 20 crores annually.
 If by using milk runs, we can reduce this overall cost of transportation even by 20 % it
would amount to a saving of Rs 1,12,000/- per day .
 Savings for the whole year would be around Rs 4 crores.
 Some Additional Issues for consideration
• The road conditions matter a lot for the speed of the vehicles. Sensitivity analysis
can be done by reducing average speed to 35 , 30 km per hour to test the
robustness.

• In India, there are toll taxes collected between cities which add to the cost in
opting for that transport leg.

• Constructing dynamic schedules in situations where the demand vary significantly.