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Albert Heijn, BV, a supermarket chain in the Netherlands, faces a vehicle routing and delivery scheduling problem once every three to six months. Given hourly demand forecasts for each store, travel times and distances, cost parameters, and various transportation constraints, the firm seeks to determine a weekly delivery schedule specifying the times when each store should be replenished from a central distribution center, and to determine the vehicle routes that service these requirements at minimum cost. We describe the development and implementation of a system to solve this problem at Albert Heijn. The system resulted in savings of 4% of distribution costs in its first year of implementation and is expected to yield 12%-20% savings as the firm expands its usage. It also has tactical and strategic advantages for the firm, such as in assessing the cost impact of various logistics and marketing decisions, in performance measurement, and in competing effectively through reduced lead time and increased frequency of replenishment.
Subject classifications: inventory: inventory routing; networks, matchings: application to inventory routing; transportation, vehicle routing: algorithm and implementation.
Area of review: OR Practice.
History: Received October 2001; accepted November 2003.
1. Introduction
Albert Heijn, BV is a leading supermarket chain in the Netherlands with 1,187 stores and about $10 billion in sales. It is a subsidiary of Ahold Corporation, a large retailing conglomerate that owns many supermarket chains around the world, with about 8,500 stores and total sales of $52.5 billion. Our data include the stores of Albert Heijn as well as its sister chain, Etos, also owned by Ahold Corporation. All figures are based on data for the year 2000. Albert Heijn faces a vehicle routing and delivery scheduling problem once every three to six months with the following main features:
1. The distribution network consists of one national distribution center (DC) and four regional DCs. Each store is assigned to a regional DC that provides all shipments to the store. Figure 1 shows the flow of information and goods through the distribution network.
2. Each store is replenished several times during a week. The time intervals between successive deliveries should not exceed a specified limit. This constraint is necessitated by the perishable nature of merchandise, small backroom space in stores, and, often,...