Development of a Logistics Planning System

Background
The client had a logistics operation with an order placement to delivery lead time such that the warehouses, of which there were over 50, had time to examine the order well daily and decided which orders they would pick and despatch to the distribution hubs, of which there were two, for onward distribution to the customers. The distribution hubs ran a combination of regular (usually daily) routes to specific customers and fixed routes to all of the others, on an ad hoc basis whenever there was sufficient stock to make up a load. A recent change had been implemented for all customers not served by a regular daily route in that orders of less than two pallets weer delivered by a pallet network or if less than 30kg by a parcel carrier.

A target to reduce their order placement to delivery lead times by 75% was imposed on the organisation as part of a larger transformation programme. What was also important was that the lead time KPI was based on calendar rather than working days.

The deliverable
In order to achieve the required reduction in lead time, the business needed to change from a warehouse push to a transport pull model. In order to do this each order in the order well needed to be examined daily to determine what delivery method needed to be used and the date on which it needed to be released for picking in order to reach the customer on with the defined lead time. With between 10,000 and 20,000 new orders being received every day this process needed to be automated and the deliverable was a system to do this together with a new function being set up to operate the planning system.

Actions

·       The first step was to engage the key stakeholders to determine the requirements and define what rules could be created to determine which delivery method was appropriate. At the same time the rules needed to reflect the rmaining lead time that was available for the order to reach its destination, which was dependent upon the location of the warehouse in which the goods were located and the destination of the goods, together with the number of working days remaining before delivery was to be effected.

·       An initial pilot was developed utilising eight basic rules, each hard coded, and this was tested against real data to estimate the possible effect of implementing this solution.

·       Towards the end of the development cycle a small department was set up to run the software tool and communicate the output to the warehouses and the Road Transport Operation.

·       Testing and training was undertaken with this new department to ensure that the solution was robust and fit for purpose.

·       The pilot was implemented. In order for the planning process to not eat into the available lead time, the planning tool was run overnight and the output was made available when the warehouse staff arrived for the day shift. Road Transport Operations were also given the output in the early hours, allowing them time to organise the necessary trunking from the warehouses to the hubs and the onward delivery.

·       After three months of operation the pilot was reviewed with all stakeholders. The experience of this initial operation was that significant improvements in service and cost reductions were being experienced. However, the rules were deemed too simplistic, resulting in additional manual intervention being required and additional rules needed to be incorporated into the planning tool to rectify this.

·       Following further analysis and work with the stakeholders 53 rules were finally identified.

·       In order to simplify development and to ensure that additional rules could be implemented with relative ease all of the underlying data that could affect which rule should be used were identified. A set of parameterised rules were built, which used the variables to determine which rule was relevant. New reports were developed which were automatically posted to a shared drive that was visible to all potential users of the reports. An automated interface was developed to Paragon, for transport route planning purposes.

·       The development was subjected to extensive unit testing, utilising real data and then to User Acceptance Testing, following which the new tool was run in parallel with the pilot to determine whether the outputs were as expected.

·       The new tool was implemented, but instead of running overnight the planning day was shifted such that the tool could be run early in the morning with the plans being produced for the period from noon to noon the following day, which enabled more management input into the planning process.

·       Post implementation support was continued at a high level for the first four weeks.

The outcome

·       Examination of every single order to determine the optimum time for releasing to the warehouses for picking.

·       Automatic determination of the optimum route for goods to reach the customer within the specified lead time.

·       Highlighting of when when use of a sub-optimal route was necessary in order to meet the required lead time, enabling informed decisions to be made whether or not to incur the additional cost.

·       Lead time reduction of 75% target being achieved on over 99% of orders, whilst simultaneously reducing costs.

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