ENGSCI263-OR Solved

Truck Scheduling and Efficiency for Woolworths NZ 

Woolworths NZ operates the Countdown, FreshChoice and SuperValue supermarket chains in New Zealand. Each store needs to receive goods daily to ensure their shelves are fully stocked. They operate a fleet of 30 trucks in order to move these goods from their distribution centre in Favona to their stores around Auckland.

On each day, each store receives pallets of goods from a distribution centre based on historical data on sales. Therefore, the number of pallets shipped to each store differs each day. For this model, we will work in units of pallets, and we will not differentiate between different product categories.

Each truck can carry up to 26 pallets of goods, and operates on a trip schedule that will have each truck deliver goods to a selection of stores, and return to the distribution centre. Once at the store, a pallet takes on average 7.5 minutes to unload. Current policy requires each scheduled trip take no more than four hours, on average, to complete; this includes both driving time and unloading time. Each truck costs $225 per hour to operate and can operate two (approximately) four-hour shifts per day. You may assume that the two shifts start at 8am or 2pm, and that each store only receives one delivery per day.

However, traffic conditions on Auckland roads are not always ideal, so the driving time required may well be longer or shorter depending on the time of day. This means some trucks may take more than four hours to complete their trip. In such cases, the extra time costs Woolworths $275 per hour.

On days where there are not sufficient trucks to satisfy all demand, either because of a shortage of truck time or an excess in store demand for pallets, additional trucks can be ‘wet-leased’ (vehicle rental that includes a driver) from Daily Freight for a cost of $2000 for every four hours of on-duty time, charged in four-hour blocks.  

Woolworths NZ would like to determine a suitable truck logistics plan such that costs are minimised. They have provided you with:

•       the number of pallets delivered to each store they operate over a 4 week period (pre-lockdown),  

•       the GPS coordinates of each store and the distribution centre,

•       the road distance (in meters) and travel durations (in seconds) between each pair of stores and distribution points.

Given the current economic situation, Woolworths NZ is also considering reducing the number of stores they operate by closing a store where two stores are unusually close to each other due to historical lease agreements. They would like an estimate of the impact of closing a store in terms of their logistics planning. The savings in transport costs can be reinvested in additional trucks; each extra truck costs $5,000 in additional fixed costs to operate per month.

Part I
1.       Analyse the data provided to develop an appropriate estimate of the number of pallets required at each store on each day which can be used in your optimisation model.

2.       Using the pallet estimates, create a set of feasible trucking routes that satisfy the requirements given.

3.       Formulate and solve a mixed-integer program to find the least-cost routing schedule for the truck fleet, using the demand estimates from part 1.

Part II
4.       Create visualisation(s) of your proposed trucking routes, suitable for presentation to management.

5.       Evaluate the quality of your schedule by creating a simulation to estimate the actual cost of satisfying actual pallet demand at every store. Your simulation should take into variations in demand and sensibly approximate the effect of traffic. Hence, give an estimate of the cost of operating your proposed routing schedule.

6.       Identify stores that could be closed under the proposal, and evaluate how the resulting cost changes affects the performance of your proposed trucking schedule. Consider also the wider implications on the systems and people that interact with the Countdown/FreshChoice/SuperValue stores and this truck logistics plan.

7.       What are your recommendations to Woolworths NZ after conducting this study?