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Shipment Consolidation Policy Project

Tornerhjelm, Carl LU and Wachtmeister, Tom (2019) MIOM05 20191
Production Management
Abstract
Title: Shipment Consolidation Policy Project. A case study at the Integrated
Logistics Product Area at the Case Company.
Authors: Carl Tornerhjelm, Tom Wachtmeister.
Supervisor: Peter Berling, the Division of Production Management.
Background: Larger corporations that distribute products and goods globally
face both internal and external demands from stakeholders. High service levels
call for frequent shipping for goods to arrive on time. However, frequent
shipping comes at a higher cost. Lately, this has become an issue for the case
company. At its cross-docking warehouse - which ships unique orders - high
safety stock is not an option. Therefore, to reduce the shipping cost, the
company’s alternative would be to increase lead... (More)
Title: Shipment Consolidation Policy Project. A case study at the Integrated
Logistics Product Area at the Case Company.
Authors: Carl Tornerhjelm, Tom Wachtmeister.
Supervisor: Peter Berling, the Division of Production Management.
Background: Larger corporations that distribute products and goods globally
face both internal and external demands from stakeholders. High service levels
call for frequent shipping for goods to arrive on time. However, frequent
shipping comes at a higher cost. Lately, this has become an issue for the case
company. At its cross-docking warehouse - which ships unique orders - high
safety stock is not an option. Therefore, to reduce the shipping cost, the
company’s alternative would be to increase lead times and consolidate
shipments into larger batches. This will reduce the number of shipments and
hence reduce the transportation cost. The key is to find a balance between these
two alternatives to satisfy all parties by implementing an appropriate
consolidation policy.
Purpose: The purpose of this thesis is to evaluate whether a new shipment
consolidation policy could be implemented for selected test locations.
Research Questions: (1) Will a shipping consolidation policy reduce the total
shipping costs while maintaining a reasonable service level? (2) For locations
with different order frequencies, is the consolidation cost reduction benefit
equal?
Methodology: The methodology framework was inspired by Höst et al. The
process included first defining the problem to be able to acknowledge what
relevant data needed to be collected. This included both quantitative and
qualitative data, as well as the literature required to solve the research study.
When all necessary data had been collected, statistical data analysis was
completed for the order arrival time, weight and volume to use as input for the
developed model.
vi
Conclusion: The belief is that the case company should implement a
consolidation policy for the selected locations. At reasonable service levels, all
locations show significant shipping cost reductions. The researchers found that
the cost reduction benefit is equal for different order frequency locations if the
optimal Time and Quantity- based policy is implemented. However, due to the
holding period restrictions set by the case company, the team recommends that
the company focuses on high-frequency locations, as these show a greater cost
reduction benefit for short holding periods. Furthermore, the data analysis
found that the data can be used in the mathematical model obtained in the
literature with some modifications. Moreover, the model is proven to be robust
as the output is only slightly affected by changes in estimated parameter inputs (Less)
Please use this url to cite or link to this publication:
author
Tornerhjelm, Carl LU and Wachtmeister, Tom
supervisor
organization
course
MIOM05 20191
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Shipment Consolidation Policy, Consolidated shipping, Dispatch policy, Time and Quantity Based Policy, Analytical Model, Cross-docking.
language
English
id
8992938
date added to LUP
2019-10-15 14:36:17
date last changed
2019-10-15 14:36:17
@misc{8992938,
  abstract     = {{Title: Shipment Consolidation Policy Project. A case study at the Integrated
Logistics Product Area at the Case Company.
Authors: Carl Tornerhjelm, Tom Wachtmeister.
Supervisor: Peter Berling, the Division of Production Management.
Background: Larger corporations that distribute products and goods globally
face both internal and external demands from stakeholders. High service levels
call for frequent shipping for goods to arrive on time. However, frequent
shipping comes at a higher cost. Lately, this has become an issue for the case
company. At its cross-docking warehouse - which ships unique orders - high
safety stock is not an option. Therefore, to reduce the shipping cost, the
company’s alternative would be to increase lead times and consolidate
shipments into larger batches. This will reduce the number of shipments and
hence reduce the transportation cost. The key is to find a balance between these
two alternatives to satisfy all parties by implementing an appropriate
consolidation policy.
Purpose: The purpose of this thesis is to evaluate whether a new shipment
consolidation policy could be implemented for selected test locations.
Research Questions: (1) Will a shipping consolidation policy reduce the total
shipping costs while maintaining a reasonable service level? (2) For locations
with different order frequencies, is the consolidation cost reduction benefit
equal?
Methodology: The methodology framework was inspired by Höst et al. The
process included first defining the problem to be able to acknowledge what
relevant data needed to be collected. This included both quantitative and
qualitative data, as well as the literature required to solve the research study.
When all necessary data had been collected, statistical data analysis was
completed for the order arrival time, weight and volume to use as input for the
developed model. 
vi
Conclusion: The belief is that the case company should implement a
consolidation policy for the selected locations. At reasonable service levels, all
locations show significant shipping cost reductions. The researchers found that
the cost reduction benefit is equal for different order frequency locations if the
optimal Time and Quantity- based policy is implemented. However, due to the
holding period restrictions set by the case company, the team recommends that
the company focuses on high-frequency locations, as these show a greater cost
reduction benefit for short holding periods. Furthermore, the data analysis
found that the data can be used in the mathematical model obtained in the
literature with some modifications. Moreover, the model is proven to be robust
as the output is only slightly affected by changes in estimated parameter inputs}},
  author       = {{Tornerhjelm, Carl and Wachtmeister, Tom}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Shipment Consolidation Policy Project}},
  year         = {{2019}},
}