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Article Excerpt
In 2004 and 2005, Coca-Cola Enterprises (CCE)--the world's largest bottler and distributor of Coca-Cola products--implemented ORTEC's vehicle-routing software. Today, over 300 CCE dispatchers use this software daily to plan the routes of approximately 10,000 trucks. In addition to handling nonstandard constraints, the implementation is notable for its progressive transition from the prior business practice. CCE has realized an annual cost saving of $45 million and major improvements in customer service. This approach has been so successful that Coca-Cola has extended it beyond CCE to other Coca-Cola bottling companies and beer distributors.
Key words: transportation scheduling; vehicle routing; distribution optimization.
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Coca-Cola Enterprises (CCE) is the world's largest marketer, producer, and distributor of Coca-Cola Company products. These products extend beyond traditional carbonated soft drinks to beverages, e.g., still and sparkling waters, juices, isotonics, teas, and energy, milk-based, and coffee-based drinks. CCE distributes Coca-Cola brands, e.g., Coke, Dasani, Sprite, Barq's, Fresca, Hi-C, Nestea, Powerade, and Minute Maid, and also beverage brands of several other companies. In 2005, CCE distributed two billion physical cases (containing 42 billion bottles and cans), representing 20 percent of the Coca-Cola Company's worldwide volume. While CCE is a publicly traded company, the Coca-Cola Company owns 36 percent of its stock.
Coca-Cola has outsourced its production and distribution to its bottling and distribution companies, of which CCE is the largest. CCE distributes syrup from the Coca-Cola plants to 64 bottling plants; it distributes bottled and canned beverages from the bottling plants to the distribution centers, and from the distribution centers (depots) to the final retail outlets (i.e., stores and vending machines) where customers buy the products. The operations research (OR) application we discuss plans the distribution of products from over 430 distribution centers to 2.4 million final retail outlets.
Figure 1 shows the current CCE territory in North America; it also operates in parts of Europe. CCE franchise territories encompass a population of 400 million people. This represents 80 percent of the population in the United States and Canada and all of the populations of Belgium, continental France, Great Britain, Luxembourg, Monaco, and the Netherlands. It employs approximately 74,000 people, 54,000 vehicles, and 2.4 million vending machines, beverage dispensers, and coolers.
The CCE fleet is the second largest in the United States after that of the US Postal Service. It has grown from 13,000 vehicles in 1986 to 54,000 today. Because of this enormous growth and the competitive nature of the beverage industry, the need to optimize product delivery became apparent. Therefore, CCE's objectives were to:
* Provide world-class customer service;
* Optimize its labor and assets;
* Reduce natural resource consumption; and
* Provide its employees with a productive but realistic working day.
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It has achieved these goals by implementing a route-optimization model through a cooperative arrangement with the ORTEC software company and Tilburg University. ORTEC provided the software and handled the implementation; Tilburg University developed the optimization algorithms and adjusted the model to CCE's specific needs. The project began in 2004; by the end of 2005, more than 300 CCE dispatchers were using the route-optimization model. CCE met the objectives of the project including annual cost savings of $45 million and improved customer service.
Product Delivery at CCE
CCE's challenge is the daily construction of optimal routes of orders from each distribution center (depot) to the retail outlets. In the literature, this is known as the vehicle-routing problem (VRP). CCE must deal with standard constraints, e.g., vehicle capacity and maximum route duration, and also with some nonstandard constraints that we list below:
* Requirements for a specific vehicle type and equipment per order and/or outlet (e.g., lift gate, military base, qualifications, certifications, technical equipment, or license). Because serving some locations requires a truck with specific equipment, the number of truck types has increased from 2 to 15; these truck types vary considerably in size, capacity, base location, cost structure, and available equipment. Because of these restrictions, some vehicle types are "scarce," i.e., the number of vehicle types that can service a specific delivery order may be limited. As an example, centers in large cities require the use of small truck types.
* Retail outlet time windows and appointments (i.e., tight time windows). Retail outlets continuously compress time windows, and many stores require CCE to deliver products either before they open or after they close.
* Driver's working hours and start time that must conform to the Department of Transportation (DOT) hours of service rules. Drivers are also required to carry a commercial driver's license that identifies the type of vehicle that DOT allows them to drive and includes any endorsements (e.g., permission to haul hazardous materials, drive vehicles with air brakes, or drive an articulated tractor-trailer vehicle).
* Traffic patterns to avoid certain areas, such as city centers during rush hours, at specific times of day.
In addition, CCE must address these "beverage-specific" constraints:
* Very specific and accurate unloading and merchandizing times. These vary by outlet types and...
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