The OPERA project at UCB: a study on the reduction of road express deliveries

Details

Supervisors

Tancrez, Jean-Sébastien

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

UCB is a company that uses express deliveries when there is a risk of stock shortage in the warehouses of its wholesalers. As it is more expensive to order an express delivery than a standard delivery, due to low transport volumes and last-minute transport bookings, the company’s transport budget exploded last year because too many express deliveries were ordered by UCB wholesalers. The aim of this thesis is to identify the root causes of last year’s express deliveries and analyse if it is possible and cost saving to reduce the company’s number of express deliveries in the future. We first analyse the potential savings that UCB could achieve in the future by reducing its express deliveries and the possible reduction of express deliveries compared to the year 2020. As manufacturing and demand uncertainties led to numerous stock outs at UCB wholesalers' warehouses last year, we then identify the products that experienced the highest degree of manufacturing and demand uncertainty last year and calculate appropriate safety stocks for these products. The aim is to assess whether UCB holds sufficient safety stocks to avoid stock-outs and reduce the likelihood of requesting express deliveries. Finally, we propose an extension of the (Q, R) model that reflects the balance between inventory costs and express delivery costs. The purpose of this analysis is to check whether it would not be more advantageous for the company to continue to use express deliveries when there is a risk of stock shortage in the warehouses of its wholesalers rather than to maintain large safety stocks. Our analyses demonstrate that many express deliveries were requested last year when there was a risk of stock-outs in UCB wholesalers' warehouses due to demand and manufacturing uncertainties. Indeed, our calculations show that UCB maintain too small safety stocks for the majority of the products that experienced a high degree of manufacturing and demand uncertainty last year, which probably resulted in stock-outs in UCB wholesalers’ warehouses or the need for express deliveries. Nevertheless, if the company wishes to maintain small safety stocks to reduce its inventory costs, our analysis on the extension of the (Q, R) model suggests that it would probably be more beneficial for UCB to continue to use express deliveries when there is a risk of stock shortage rather than to increase its safety stock for some products.