An Application of Cross-docking Theory to Solve the “last-mile Logistics” Problem at the Pennsylvania State University’s Food Delivery Department

Open Access
Author:
Lu, Miao
Graduate Program:
Industrial Engineering
Degree:
Master of Science
Document Type:
Master Thesis
Date of Defense:
None
Committee Members:
  • Jose Ventura, Thesis Advisor
Keywords:
  • Cross-docking
  • Last-mile-logistics
  • Food delivery
Abstract:
The Pennsylvania State University is one of the largest universities in the United States, with huge demands of food to serve the students from all its 24 campuses. As the orders for food are large, the school uses a bulk buying strategy to purchase from the producers, whose prices are 20% to 40% lower than the wholesalers’. The most frequently consumed products are the meat products and the fresh produce (vegetables and fruits). Because the meat products can be frozen to extend their shelf life, the school consolidates orders from all its campuses, and stores the products in the central warehouse located on the University Park (UP) campus. The school’s delivery team then redistributes the products to 15dining halls and stores on the UP campus as well as all the dining halls on 11 other campuses (the other 12 campuses purchase independently). To save on transportation costs, deliveries are as infrequent as once every two weeks to some campuses. On the other hand, because of the short shelf life of vegetables and fruits, dining halls on campuses outside the UP campus buy from local wholesalers, although the prices are higher. Also, to save time, the suppliers deliver to the dining halls directly (instead of to the warehouse). The transportation costs are high for them because transporting to crowded campuses is very time consuming. This is known as the “last-mile logistics” problem. The handling costs are also high, since the truck from each supplier needs to be unloaded at each dining hall (compare to unloading once at the warehouse). A cross-docking strategy can be helpful to reduce the costs and by reducing the fuel consumption, it is also helpful to keep the air cleaner. It requires the incoming products being loaded to the outbound trucks directly, to save delivery time and to increase the delivery frequency. By applying this strategy, the school can deliver more frequently to the campuses other than the UP campus to satisfy their demands, consolidating orders to cut out the wholesalers and lowering the purchasing costs. What’s more, the school’s own delivery team can perform the “last-mile logistics” instead of the suppliers, with smaller trucks to save delivery time and costs. There are several ways to apply a cross-docking strategy. Other than the current strategy, three possible alternatives are considered, including pre-allocate cross-docking strategy, post-allocate cross-docking strategy and hybrid cross-docking strategy. The aim of this research is to compare the total costs under different strategies, and find the one with the lowest cost. A cost comparison model is built in this research that includes three parts: 1) purchasing cost, 2) delivery cost and 3) inventory carrying cost. To optimize the delivery routes with the shortest traveling distances, a vehicle routing problem model is built for the alternative strategies, and the problem is solved by the software LINGO. By calculating total cost from each strategy, the results show that a hybrid cross-docking strategy is the most suitable strategy, which can save approximately $50,000 annually from the current strategy.