Test Driving Logistics Software – Part II: Optimization Engines

by Dirk Schlemper

Shortly after purchasing the Audi 100, my friends and I hit the road to explore the coastal drives of southern France. When we arrived in Monaco, we got stuck in the evening rush hour. And right behind the famous Mirabeau corner, the engine started to overheat. We opened the hood, but since none of us was a qualified mechanic, we just ticked the checkbox, “Yes, engine still in place”, let it cool down and, after an hour of waiting, we continued our “race” on the Monte Carlo Grand Prix track.

To prevent your logistics operations from failing where it hurts most, take a look under the hood of the software package you consider to buy. Logistics software vendors typically use three different types of engines to drive their calculations:

  • Spreadsheet based calculations
  • Pre-defined business rules
  • Engines powered by algorithms.

Simple spreadsheet based tools are sufficient to support the decision-making process of transport plans with low complexity and low unpredictability. As complexity rises, more advanced decision support is required such as pre-defined business rules. When both unpredictability and complexity increase, the operational plan must continuously change to accommodate unexpected disruptions and ad-hoc changes while still focusing on the best business result, also known as objective. These environments require planning software that is powered by algorithms to make the best-informed decisions.

Digital Torque

Over the past 25 years, improvements in computer hardware have resulted in an increase in computing power by a factor of 2,000 times. This seems impressive until one compares it to the advances in optimization algorithms over the same period. For instance, Linear Programming algorithms, one of the most important class of optimization techniques, have improved by a factor of 1.4 million times. When combined, the effects of both advances generate a tremendous 2.8 billion times improvement in processing capability.

To better understand this, a planning model, using Linear Programming, that takes us a second to solve today, would have taken almost 100 years to solve at the beginning of the 90’s.

Algorithms Make the Difference

But not all algorithms are alike. The figure below compares three different scenarios for a cement producer in Europe with an annual transport volume of about 1.6 million tons: 

  • No optimization software
  • Intelligent algorithms
  • Agile optimization.

The benefits of using high quality algorithms are huge: the difference in cost saving amounts to more than 400,000 EUR per year. For a deeper analysis of these numbers, please see International Cement Review (ICR), Oct. 2015, p. 117.

 

The lesson? When entering the showroom of a software vendor, don’t just rely on the window sticker. Check carefully which algorithms and optimization methods are used. Ask questions when unsure.

And don’t be misled by top speed claims and world records. In the third and final part of this article, we will find out why they are not that important and what happened to my Audi 100 when we returned from Monaco.

What was the most exciting trip you took with your first car?



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About the author

  • Dirk Schlemper

    Dirk Schlemper is responsible for Marketing and Sales at INFORM's Logistics Division – with a focus on container and bulk materials logistics. Bringing over 20 years of marketing experience and having completed over 30 marathons, he loves to create results for the long haul.

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