Optimizing Transportation Costs in Supply Chain Management: An Application in the Food Sector

Abstract

Purpose – The purpose of this study is to optimize transportation costs between a manufacturer and a retail company in the food industry to make supply chain management more efficient. The dispatch processes between the manufacturing company, which has 4 factories based in İzmir, and the retail company, which has 49 warehouses across Türkiye and is based in İstanbul, are analysed.

Design/methodology/approach – To solve the problem, an initial solution is obtained using the Vogel Approximation Method (VAM) in MATLAB. This solution is then improved with the Modified Distribution Method (MODI), also coded in MATLAB. Finally, the problem is solved with a linear programming model written in General Algebraic Modeling System (GAMS) to obtain optimal results.

Findings – As a result of the applied methods, the most cost-effective transportation plan for the manufacturer and the retail company was determined and an optimal solution was obtained. VAM provided an initial solution, MODI method further minimized the cost and GAMS validated the results to provide the optimal distribution plan. In both proposed solution stages, 3.67% reduction in total cost was achieved compared to the current situation.

Discussion – The study highlights the importance of reducing transportation costs in supply chain management. The effectiveness of the methods used was compared, and the advantages of each were evaluated. This study presents an optimization model that can guide companies with similar logistics processes.