A large food retailer faced the challenge to drive profitability from its e-commerce operation, with capillary distribution as a critical concern. Given the interdependency between several decisions (e.g., hub locations, fleet size, vehicle capacities, delivery slots available to the client), a tool became necessary to test distinct scenarios and find potential improvements.
Detailed impacts needed to be estimated for each scenario, to empower decision makers. Besides tactical planning, the tool would also be leveraged for budgeting purposes.
A simulation tool was designed and implemented to draft a prospective budget for each given scenario.
Behind it lies a predictive model that estimates travel distances by leveraging demand densities.
Historical orders, business trends (e.g., demand growth by region) and the scenario’s parameters (e.g., active hubs, delivery slots) are key inputs. For certain parameters, the model can adopt a prescriptive stance (e.g., fleet size).
A dashboard complements the simulator to provide an overview of past performance. KPI’s are common to both tools: cost and service level (e.g., share of on-time deliveries)
A solid planning environment (simulator + dashboard) became available to the team in charge of e-commerce distribution. A user-friendly interface enables a quick interpretation of the outputs.
As a consequence, higher planning consistency and faster improvement cycles were achieved. Tests to the simulator, based on past decisions and ensuing results, showed global deviations under 2% for the prospective monthly budgets.