E-commerce Distribution Network Capacity Planning and Supply Chain Modelling

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Carriers constantly face the challenge of allocating capacity for Less-Than-Truckload (LTL) and parcel deliveries in their transportation network. The challenge stems from the fact that standards for weight limits and pricing schemes that are dependent on volume density, dimensions, and handling keep changing, and this in turn has an impact on profitability. LTL loads are usually several pallet loads of goods that do not fill up a truck, whereas parcels are individual packages or parcels that are not palletized, and take up significantly less space on a truck when compared to LTL's. Furthermore, parcels are usually loaded on smaller trucks in order to do the last mile delivery to the end customer. The volume of the parcel business has increased dramatically over the years thanks to e-retailing. In 2018, 87 billion parcels were shipped globally, and in 2025, the volume is estimated to be 200 billion. Given the differences in handling LTL loads from parcels, it is typical for carriers to use a dedicated fleet for each type of service. Unfortunately, this means that trucks will not be fully utilized, and the cost of transportation will increase. Typically, transportation costs represent 65% of the total logistics costs, and it is imperative that every effort is made to reduce this cost as much as possible. The research aims to develop a decision-making model for carriers to support operations, tactical, and strategic decisions regarding capacity allocation and revenue management. That is, given a fixed transportation capacity, how should a carrier optimally allocate LTL and parcel loads in order to maximize the utilization of the trucks and reduce their costs. The research will look into the feasibility of mixing LTL and parcels loads in a single truck.