Cost Optimization for Line Haul Transportation of 3pl Players

4616 Words Jun 29th, 2011 19 Pages
Cost Optimization for line haul transportation of 3PL Players
Logistics costs (i.e., inventory holding, transportation, warehousing, packaging, losses and related administration costs) have been estimated at 13-14 per cent of Indian GDP. There is a rise in the no. of companies outsourcing their logistics operations to 3PL providers. The 3PL providers provide mainly transportation services, warehousing services and inventory management.
The research was carried out on a 3PL company, which provides comprehensive logistics solutions primarily to the automotive industry. Their inbound logistics deals with the collection of consignments (forgings and auto-components) from the suppliers and delivering them to customers. Collection
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Initial groundwork was laid through a field visit to one of the major hubs of the company’s logistics network. Consultation with the top management of the company also helped to get a thorough understanding of the operational framework, the problems faced and the cost drivers of their logistics functions, a model was developed to bring about cost reduction. This model was validated with the actual past data obtained from the operations of the company.
Operational details
An inbound logistics operation of a 3PL company usually follows the process as depicted below. The flow of materials from the suppliers to the customers is routed through a hub. The collection and delivery follows a schedule as given by the customer.
Milk run 1

Line haul
Hub 2
Milk run 2

1. Milk Run
Milk run process is used for collection of parts or automotive components from various suppliers in the nearby region. Usually an LCV (2.5-3.5 T) or MCV(6T) is used to collect material from the suppliers on a daily basis. The components which are collected through the milk-run operation are then segregated according to the different supplier items and loaded on separate trucks for Line Haul.
2. Line Haul
The parts or automotive components which are collected in the hubs have to be sent to the respective hubs near the customers’ manufacturing locations. So, planning and loading of components is done for

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