Strategies for an integrated distribution problem

Problems arising in the logistics of commercial distribution are complex and involve several players and decision levels. One of the most important decisions is the design of the routes to distribute the products in an efficient and inexpensive way but also satisfying marketing objectives such as customer loyalty. This chapter explores three different distribution routing strategies. The first strategy corresponds to the classical vehicle routing problem where total distance or cost is minimized. This one is usually an objective of the Logistics department. The second strategy is a master route strategy with daily adaptations where customer loyalty is maximized, which is one of the objectives of the Marketing department. The authors propose a third strategy which takes into account the cross-functional planning between the Logistics and the Marketing department through a multi-objective model. All strategies are analyzed in a multi-period scenario. A metaheuristic algorithm based on the Iterated Local Search is proposed and applied to optimize each strategy. An analysis and comparison of the three strategies is presented through a computational experiment. The cross-functional planning strategy leads to solutions that put in practice the coordination between the two functional areas of Marketing and Logistics and better meet business objectives in general.