Vehicle routing for improving financial performance: A case study of a freight transportation service provider in Thailand

Many freight transportation operators usually encounter non-value added activities which give them a hard time to make profit. Sometimes, those activities even make the operators lose money. In this paper, we studied the vehicle routing practice of a freight transportation company which provides the delivery service of cooking oil products to customers in Bangkok Metropolitan Region and neighboring provinces in central region in Thailand. In our previous research, we have studied its manual route planning and the corresponding financial performance. It was found that 50% of the total trips from distribution records did not reach the break-even point. It was suspected that the loss could be the consequence of inefficient route planning and/or unreasonable contract price (i.e., too low). Therefore, this research is aimed to examine whether the scientific route planning can improve the company´s financial performance significantly. We developed a Web-based routing application (WBRA) which uses the sequential version of Clarke and Wright´s saving algorithm for solving the optimization problem to obtain the near optimal solution. The WBRA works with the database and allows for inputting the new customer. We obtain travel distance and travel time information by using the free-of-charge version of Google Maps Application Programming Interface (API). In the testing with 44 customers, the developed WBRA showed 116.84% improvement on the profit over two days. The amount of profit might be able to increase from -7,874 baht (or 7,874 at loss) to 1,326 baht. The analysis results implied that the inefficient route planning may be one major cause of the problem for this freight transportation company. Perhaps, the company needs a scientific routing analytical tool to improve its route planning operation and the bottom line such as our developed WBRA.