Matching volatile demand with transportation services in Vietnam

Abstract

Purpose – Demand for retail transportation is typically volatile, and it is driven by the end of period (month) spiky deliveries. This is especially the case in emerging markets. The purpose of this paper is to examine situation in one of the leading Vietnamese logistics service company with numerous customers within the area of Ho Chi Minh City. Design/methodology/approach – Research work is based on a case study within a company called Gemadept, who is providing logistics services in Vietnam. Researchers were given access to the company data on distribution system, and the authors had collected daily data from transportation operations. Findings – Considerable truck utilization can be achieved even with volatile retail demand environment if optimization is applied to allocate trucks and drivers on certain routes and customer demand points. Relaxing service level of customers shall improve situation further, but not significantly. However, from logistics service point of view, it would be best to use numerous shifts per day (night shift option) to distribute products – this would enable high utilization of distribution fleet while overcoming spiky demand. Research limitations/implications – Analyses are dependent on a single case study of one logistics service provider in Vietnam. While this may limit the findings to some extent, but with rich case data and observations within the company distribution system, it provides the required depth to build an optimized model for the company. Practical implications – In volatile demand environment, it is important to allocate trucks and drivers as well as work schedule in a systematic order, and not based on trial-and-error human intervened timetable. System perspective also enables evaluation of different strategies and their implications on performance. Originality/value – Research work represents one of the seminal studies of Vietnamese retail logistics sector, and verifies that demand uncertainty is high in such environment in addition to exhibiting the end of period demand spikes (hockey stick effect).