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Newton.Vaureal Consulting – Logistics Network Design

Newton.Vaureal Consulting

Newton.Vaureal Consulting is a consultancy company specialized in operations management. From the beginning in 1998, Newton chose to form their own team of operations research specialists to handle all modeling needs that arise in business projects such as network design, planning, and scheduling. With 6 network design projects carried out by LocalSolver last year, Newton optimized €160 million of logistics costs and obtained 12% savings on average.

Context and problem

Newton recently achieved several projects on the optimization of dense logistics networks for both B2B and B2C retail. The project presented below concerns a French retailer of frozen food (prepared meals and raw food) delivered at home in certain regions of mainland France (€70 million of annual revenue). The retailer operates two national logistics sites that prepare all customer orders, further transported to 70 local distribution sites. Given an expected increase in sales of 15% in the next 3 years, the goal was to challenge the economic efficiency of the logistics network of this retailer: optimal number and location of local distribution (level 1) and preparation sites (level 2).

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Key figures

  • 300,000 customers grouped into 3,700 geographical clusters
  • 70 distribution sites + 250 locations for new sites
  • 2 preparation sites + 250 locations for new sites
  • 1 million decision variables
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Constraints

  • Each customer is assigned to a distribution site
  • Each distribution site is assigned to a preparation site
  • Lower limit on the activity level of each distribution site
  • Capacity of preparation sites
  • At most one additional preparation site
target

Objectives

  • Minimize transportation costs for downstream flows
  • Minimize fixed and variable costs for preparation sites
  • Minimize fixed costs for distribution sites
  • Minimize costs for incoming transportation to preparation sites
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Results

The first optimization level (location of local distribution sites) addresses 71% of the total logistics costs and is the most challenging part. This problem was efficiently modeled and solved by LocalSolver. Using a set formulation, Newton.Vaureal Consulting obtained a near-optimal solution in 3 minutes. The financial savings were above 8% overall cost-to-serve and 10% on the first logistics level.

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Why LocalSolver?

According to Renaud Lacour, Modeling Expert Consultant, Newton.Vaureal Consulting has chosen LocalSolver for three main reasons. First, the powerful optimization engine is able to solve to optimum or near optimum the real-world instances that arise in their projects. Second, the high-level modeling language and sophisticated Python interface enable them to quickly build readable and reliable models. Last, the technical support is very reactive and helpful in improving the efficiency of their models.

The innovating features of LocalSolver and its unique modeling formalism have allowed us to solve numerous problems on which we could not find satisfying solutions with MIP solvers. LocalSolver’s performance surpasses greatly our expectations on the TSP, matching and facility location problems we’re working on. In one year, we have optimized €160 million with an average gain of 12%. The reactive and precise support given by Nikolas has greatly helped us in moving forward quickly on our projects.

Renaud Lacour, Modeling Expert Consultant, Newton Vaureal Consulting

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