Mathematical formulation and heuristic algorithms for optimisation of auto-part milk-run logistics network considering forward and reverse flow of pallets

The operational planning of distribution network for automotive industry is complex with many conditions to consider, including heterogeneous fleet, enforcing the feasibility of 3D-packing of pallets into vehicles to address the vehicle's capacity in terms of weight and volume, compatibility of orders in a vehicle, returning empty pallets from assembly-plants backwards to suppliers, and delivery time windows. A mathematical model (MILP) is proposed that takes account of these conditions to minimise total transportation costs. The network structure can be a combination of direct shipment and milk-run for both forward and reverse flow of pallets. The model is solved optimally for small-size problems. For solving larger problems, a heuristic algorithm (in two versions) is proposed that uses a similarity measure to generate a reasonable list of orders. Best/first-fit strategies are employed to generate a feasible solution with the aid of a relaxed version of the proposed MILP. Improvement heuristics are also designed. Unlike most of existing constructive heuristics, our aim for developing the heuristic approach is to force routing decision, with all of its considerations, being made optimal. We also use the proposed best-fit strategy in the body of grouping evolution strategy (GES) algorithm to attain an effective meta-heuristic approach. The effectiveness of heuristics is tested on generated instances which demonstrates they are optimal for small-size problems. They are also tested on the data of daily auto-parts shipments gathered from the largest Iranian automobile company. Results demonstrate there exists a significant potential for cost saving through milk-run strategy compared with the direct shipping strategy.