A decision support system for reducing empty run costs in a logistic service provider company

Abstract

Two of the most important key performance indicators (KPI) in logistic service provider (LSP) companies are the cost of empty trailer transportations and the cost of outsourced trailer. Manufacturing companies are mostly cost-oriented while they are outsourcing their international transportation activities to the third-party logistic companies. This behavior of the manufacturers causes high demand fluctuations on the LSP company side. On the other hand, the volume of exports and imports are often imbalanced for an LSP. Hence the LSPs need to transport empty trailers between countries, or outsource trailers to fulfill the transportation needs in export and import directions. Within the scope of this study, a decision support system (DSS) is proposed for an LSP company to decrease the empty trailer movements and the number of outsourced trailers so that the total transportation cost is reduced. The generated model considers intermodal transportation of orders internationally. The DSS is implemented in one of the largest LSP companies in Turkey. The performance of the DSS is tested to show that it improves the effectiveness, efficiency, and the flexibility of the decision-making environment in logistic planning.