Choosing the minimum order size in large-scale retail trade distribution

One of the main issues characterizing the large-scale retail trade (LSRT) distribution is the relatively high transportation costs compared to profit margins. The complexity of non-integrated supply chains worsens this problem because the actors – wholesalers, third-party logistics providers and retailers – may reasonably have different and conflicting aims. Furthermore, due to the numerous operational field-specific peculiarities, it is not possible to straightforwardly apply those consolidated operations management models which have been conceived in other industrial contests. Among these, the classical models for defining the appropriate order size to minimize transportation costs seem not to be appropriate for the LSRT context. In this paper we propose an approach to compute the minimum order size for a network of retailers supplied by a single wholesaler, to obtain an overall transportation costs optimization through the increase of trucks saturation. Taking cue from literature review on optimization techniques in LSRT supply chain and logistics, and highlighting the context-specific constraints, we propose an heuristic approach which has been validated on the case of an Italian LSRT company.