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Simulation Based Optimization of Logistics Decisions Under Horizontal Collaboration
Hammoud, Shaza Mouhib
Hammoud, Shaza Mouhib
Description
A Master of Science thesis in Engineering Systems Management by Shaza Mouhib Hammoud entitled, “Simulation Based Optimization of Logistics Decisions Under Horizontal Collaboration”, submitted in June 2023. Thesis advisor is Dr. Mohamed Ben-Daya, and thesis co-advisor is Dr. Rami Afif As’ad. Soft copy is available (Thesis, Completion Certificate, Approval Signatures, and AUS Archives Consent Form).
Abstract
Logistics operations nowadays are facing challenges pertaining to the increase of fuel cost, underutilized trucks capacity, and rising environmental concerns. As such, companies are continuously looking for solutions to address those challenges, where horizontal collaboration has proved to be one such effective strategy. Horizontal collaboration in logistics is typically formed between at least two companies working on the same level. It allows supply chain partners to exploit the economies of scale of consolidating their orders. However, synchronizing the orders of these partners to be shipped using the same fleet of trucks is a complex problem. This requires making trade-offs between the inventory holding cost on one end, and the transportation cost on another. Therefore, this thesis intends to provide a resolution using a joint replenishment inspired strategy referred to in the literature as the can-order policy. For the case of two parties, the can-order policy has three thresholds that enable each company to initiate its own order or join the order of the other company or do nothing. For instance, when a company initiates an order, another company can join the order if its inventory level reached a threshold value called the can-order level. Indeed, determining the values of these three thresholds that minimize the total logistics cost coupled with the 𝐶𝑂₂ emissions is a challenging task. To that end, this thesis adopts a simulation-based optimization approach to build the collaborative shipping model between two companies and optimize the can-order policy parameters. The model is built considering demand and lead time uncertainties, homogeneous truck capacity and service level constraint. The result of the “what if analysis” shows that the can order policy is able to synchronize the orders in a horizontal collaboration setting. In particular, the horizontal collaboration yields higher cost savings as compared to the standalone case when the unit holding cost is low and companies are identical in the sense that they have the same demand, unit cost, and holding rate values. Also, it results in significant reduction in 𝐶𝑂₂ emissions when both the demand and weight of the products are low.