Research into the potential effects of a receiver-led consolidation policy on costs, CO2 emissions and vehicle movements

Abstract

The efficiency of a logistic service provider's network can be improved by implementing a receiver-led consolidation policy. This policy means that shipments destined to the same location are consolidated in one truck. The literature states that by doing this the costs, CO2 emissions and number of vehicle movements can be reduced. However, consolidating shipments towards hospitals is complex due to the fact that medication is a highly regulated product and non-regulated products are also needed at the hospitals. 
Furthermore, from the stakeholder analysis, it became apparent that such receiver-led consolidation policy is also favorable for hospitals. The efficiency of the operating practices in the logistics department in hospitals can be improved by reducing the number of deliveries. However, from the literature became apparent that the knowledge on the effects of a receiver-led consolidation technique implemented in a logistics service provider's network is still lacking. Especially on how receiver-led consolidation can improve the efficiency of a logistic service provider's network and how this affects the other stakeholders. This problem is stated in the following main research question: What is the impact of receiver-led consolidation alternatives in the PostNL supply chain with respect to trade-offs between costs, CO2 emissions and vehicle movements between PostNL and other stakeholders? In order to find an answer to this research question, a case study for the logistics service provider PostNL is carried out. PostNL has several networks that deliver shipments. However, mostly the Cargo, Pharma\&Care and Mikropakket network deliver shipments to hospitals. It appeared that these three networks barely work together which results in overlap between destination addresses. This means that two or more networks can make a delivery to a certain address on the exact same date. Furthermore, the Pharma\&Care network is meant for large deliveries. However, it sometimes occurs that this networks makes a stop for just one or two colli. This is an expensive stop in comparison to the Mikropakket network. Therefore, a conceptual model of the current data-processing system of PostNL is created. After brainstorm sessions and discussions with PostNL employees, it became apparent that many bottlenecks originate from this process. Therefore, a discrete event simulation model is created that captures this model. 
Furthermore, two design alternatives have been proposed to improve the efficiency in the current system. The two design alternatives that have been created are: (1) integrating the processes of different networks and (2) implementing a smart planning process which controls the data sets of all networks. In the first alternative, all shipments are checked on a pre-defined list. If the destination address is present on this list, the shipments are redirected to the Pharma\&Care network. Otherwise, the shipments continue in their original process. The second alternative, consolidates all shipments of all networks in a certain network, based on their characteristics. These design alternatives have also been implemented in a discrete event simulation model. 
The data obtained from PostNL has been used to measure the effects of the design alternatives on the current system. When analyzing the results obtained from the simulation model, it can be seen that the overlap, the number of stops, operating costs and CO2 emissions have been reduced in both design alternatives compared to the current system. The second design alternative yields the highest benefits. However, this alternative is expected to be more difficult to implement in the current system of PostNL. 
Moreover, the analysis of the output data has also shown positive outcomes for the other two core stakeholders (hospitals and suppliers of end-products). According to the stakeholder analysis, the outcomes of the second design alternative are more favorable. To conclude, implementing a receiver-led consolidation policy in a logistics service provider network yields many benefits with respect to the efficiency. The overlap between networks on destination addresses, the number of stops, the operating costs and the CO2 emissions are reduced. Since, the second design alternative scores highest on all aspects, it is recommended to PostNL that this alternative is implemented. This way, all shipments are consolidated over the three networks and the efficiency of the logistics service providers network is improved the most.