Case study:

Home Delivery Network Planning

Parcel Delivery Company

Background & Brief

The company had recently undergone a Management Buyout (MBO) and the executive wanted to minimise the capital requirement while reducing the ongoing running costs of the network. A key output of the project was a rationalisation of the depot structure. They required the support of an experienced network modeller to evaluate various options and estimate the optimal number of vehicles required across the network.

Project Approach

SCALA modelled the optimum location and number of depots within the network and these findings were then modified according to what was practically achievable given the constraints the company had to contend with. The key stages in the project were:

  • The optimal solution was modelled based on current and future volume flows
  • Ideal model reviewed against current cost and contract structures
  • Stranded Costs were identified where depots had to be maintained
  • Revised model developed an optimal solution based on network-specific constraints
  • Implementation of a routing software solution
  • Implementation of a KPI monitoring system to improve service levels
  • Enabled effective pre-10 am service to be marketed to the customer base

Benefits & Results

The project produced significant results and enabled the new management team to effectively run the business.

  • Overall logistics costs were cut by 20%
  • Network rationalisation saw the closure of 5 depots
  • Improved KPI measures and service performance
  • Embedded learning – employees trained to map and model optimal network structures

Final Outcome

The project realised significant savings and operational improvements that enabled the new executive team to restructure the business without incurring additional capital costs.