Third Party Transportation: A Case Study

In this paper we present a case study of an operating company of a large multinational, in Turkey. We were invited to improve the performance of their distribution of products. The distribution network is a variant of the Third Party Routing Problem (TPRP). The TPRP consists of serving a number of customers from a central depot via a fleet of Third Party trucks, the objective being to minimise the cost of truck hire. One or more independent transporters, who are obtained through agents, operate the fleet of trucks. This approach to vehicle routing is increasing in popularity throughout Europe. TPRPs are a class of Vehicle Routing Problems (VRP) with a specific cost structure, which dictates that the cost of a truck is determined solely by the most expensive destination on the route. This allows us to formulate the TPRP as a Generalised Assignment Problem (GAP) plus additional constraints. This is part of our ongoing work with our industrial partners in the detergent industry.