European Journal of Logistics, Purchasing and Supply Chain Management Vol.6 No.2, pp.10-25, April 2018 ___Published by European Centre for Research Training and Development UK (www.eajournals.org) STUDY ON TRANSPORTATION AND DISTRIBUTION STRATEGIES FOR A LOGISTICS CENTER - AN EXAMPLE OF LOGISTICS COMPANY A Kao Ching-Kuei, Li Shuting, Huang Haixiong, Deng Shitong Department of Logistics Management, Beijing Institute of Technology, Zhuhai ABSTRACT: Storage, transportation, and distribution are important processes in modern logistics companies, greatly influencing their operation and profits. This research analyzes and formulates the transportation and distribution strategies for a logistics center through a case study of a logistics company. The strategies aim to enable effective transportation of the goods of the shipper to the destination through the logistics center, by which the company provides its customers with qualified and efficient logistics service. Integer programming is first applied to implement quantity allocation of goods in all production spots under the considered lowest transportation costs to satisfy all the demands in all demand points. Transportation routes are then planned in accordance with the integer programming results, and vehicle demand is calculated, with public vehicle resources taken into consideration. Finally, the rationality of the site selection planning for the logistics center is verified. KEYWORDS: Transportation Route Planning, Vehicle Demand Planning, Public Vehicles INTRODUCTION Storage, transportation, and distribution are involved in logistics transportation method, and these processes are planned according to the actual demands of customers. A logistics company should develop strategies regarding these processes to make traditional logistics transportation customer-centered and efficient. This shift can lead to a new development in the logistics industry. As the main resource of “the third profit source,” (Liu, 2004; Wen, 2006; Liu, 2013) storage, transportation, and distribution are essential processes of modern logistics companies, greatly influencing their operation and profitability. Storage, transportation, and distribution involve plans and arrangement of transportation vehicles and routes (Mohan, et al., 2009; Benantar and Ouafi, 2012). The basic workflow is coordinated by logistics companies from the beginning of raw material purchase, product production, to the end of product sales so as to lower cost, save time, and improve work efficiency. Therefore, storage, transportation, and distribution are crucial to product integration in all product transportation links of a logistics company. Great flexibility of product adjustment and supplies is ensured during purchase, production, and sales. Storage, transportation, and distribution serve as an important support to the service of logistics companies (Zhuang, 2009). This research is conducted through a case study of a logistics company, whose branches are established nationwide in nationwide provincial capitals and other major cities. Distribution center in each city is operated independently from the major cargo transportation business. Shipper’s cargo is directly loaded from the freight station in the production spot to all the warehouses of merchants and allocated to distribute to lower sites. Doing so can reduce storage fee and save a large amount of logistics costs for shippers. However, in face of severe market tests conducted externally, the company decides to plan and construct several large-scale 10 ISSN 2054-0930 (Print), ISSN 2054-0949 (Online) European Journal of Logistics, Purchasing and Supply Chain Management Vol.6 No.2, pp.10-25, April 2018 ___Published by European Centre for Research Training and Development UK (www.eajournals.org) regional distribution centers (RDCs) to serve as the pivotal platform for logistics operation. Considering the limitations of transportation time and distribution distance, every RDC has its own city of responsibility. In the future, goods in production spots will be first sent to each RDC and then transported by the RDC to merchants’ warehouses in its city of responsibility. This plan is expected to improve service capacity, reduce transportation cost, and increase delivery punctuality and time efficiency of logistics service as well as reduce the losses caused by goods out of stock through RDC integration. However, in the initial RDC plan period, social vehicle resources from a third-party logistics company are considered if transportation capacity of RDC vehicles cannot satisfy the transportation demands of customers due to resource limitations (Yuan, 2009; Zhang, et al., 2015). This recourse can satisfy the demands of RDC customers under such a circumstance. This study analyzes and formulates the transportation and distribution strategies in the enterprise’s RDC so as to enable the effective transportation of the goods of the shipper to the destination through the RDC, by which the company provides its customers with qualified and efficient logistics service. Background of Logistics Company A In this case, Logistics Company A plans to construct six large modernized RDCs in the economically developed domestic regions in the future to build a logistics operation platform, in which the large RDCs represent the hub. Table 1 presents the site selection plans and corresponding radiating cities. X Beverage Company, a customer of Logistics Company A in the study, has three production factories in Hangzhou, Chongqing, and Changchun and 34 demanding bases in China. In the previous modes, X Beverage Company needs to search for social vehicles to transport the goods to the wholesalers and warehouses in each place. However, problems often occur. To solve these problems, X Beverage Company and Logistics Company A establishes a logistics partnership in the supply chain, which means that Logistics Company A is responsible for designing and handling X Beverage Company’s cargo storage, transportation, and distribution businesses. Figure 1 illustrates the supply model of Logistics Company A and beverage of X Beverage company. This study analyzes the transportation demand model of X Beverage Company, designs the transportation plan, verifies the rationality of RDC site selection through the strategic planning of Logistics Company A, and makes a comparison analysis of the two plans with and without RDC from the perspective of cost and time efficiency. METHODOLOGY OF TRANSPORTATION PLANNING Table 2 shows the average ordering level of X Beverage Company. Ordering increases by 15% to 20% in summer and decreases by 10% to 15% in winter. The monthly productivity in Hangzhou, Chongqing and Changchun are 40,000 tons, 30,000 tons, and 30,000 tons, respectively, totaling 100,000 tons. 11 ISSN 2054-0930 (Print), ISSN 2054-0949 (Online) European Journal of Logistics, Purchasing and Supply Chain Management Vol.6 No.2, pp.10-25, April 2018 ___Published by European Centre for Research Training and Development UK (www.eajournals.org) Table 1. RDC locations and its radiating cities RDC Locations Radiating Cities Neijiang City, Sichuan Province Chongqing, Chengdu, Guiyang, Kunming, Lhasa Qingyang City, Gansu Province Xi'an, Lanzhou, Yinchuan, Xining, Zhengzhou, Taiyuan, Urumchi, Hohhot Guangzhou City, Guangdong Shenzhen, Guangzhou, Nanning, Haikou, Xiamen Province Tianjin Tianjin, Beijing, Qingdao, Jinan, Shijiazhuang, Shenyang, Changchun, Harbin Nanchang City, Jiangxi Province Wuhan, Nanchang, Changsha, Fuzhou Shanghai Shanghai, Nanjing, Hangzhou, Hefei RDCs of Logistics Demand spots Company A Neijiang City, Sichuan Large wholesalers and Production factories of X Province farehouse in radiating cities Beverage Company Qingyang City, Gansu Large wholesalers and Hangzhou Province farehouse in radiating cities Guangzhou City, Large wholesalers and Consumer Chongqing Guangdong Province farehouse in radiating cities Large wholesalers and Tianjin Changchun farehouse in radiating cities Nanchang City, Large wholesalers and Jiangxi Province farehouse in radiating cities Large wholesalers and Shanghai farehouse in radiating cities Figure 1. Beverage Supply Model of X Beverage Company and Logistics Company A Integer programming is applied to allocate the goods in each production bases to its own demand points so as to guarantee the lowest transportation costs (Zhou et al., 2015) and reasonably and economically design the routes according to the different transportation modes of Logistics Company A’s agents. Finally, the location of vehicles owned by the company are rearranged and the demands of social vehicles is calculated if capacity is insufficient to meet the demands. 12 ISSN 2054-0930 (Print), ISSN 2054-0949 (Online) European Journal of Logistics, Purchasing and Supply Chain Management Vol.6 No.2, pp.10-25, April 2018 ___Published by European Centre for Research Training and Development UK (www.eajournals.org) Table 2. Demand of X Beverage Company Demand Demand Demand City (kiloton) City (kiloton) City (kiloton) Beijing 4.05 Fuzhou 2.25 Nanchang 1.80 Guangzhou 4.05 Jinan 2.25 Nanning 1.80 Shanghai 3.60 Nanjing 2.25 Qingdao 1.80 Shenzhen 3.60 Shenyang 2.25 Zhengzhou 1.80 Hangzhou 3.15 Shijiazhuang 2.25 Guiyang 1.35 Xi'an 3.15 Taiyuan 2.25 Hefei 1.35 Chengdu 2.70 Changsha 2.25 Xining 1.35 Haikou 2.70 Chongqing 2.25 Urumchi 0.90 Xiamen 2.70 Harbin 1.80 Yinchuan 0.90 Tianjin 2.70 Hohhot 1.80 Lhasa 0.45 Wuhan 2.70 Kunming 1.80 Changchun 2.70 Lanzhou 1.80 Table 3. Unit cost of transportation Production spot From Production