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ESD Research Domains
ESD Research Approaches
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Wal-Mart, the world’s largest retailer, is
also one of the largest private fleet owners, with more than 8,000
drivers operating more than 60,000 pieces of equipment. In addition
to using its own equipment, the company is a major purchaser of
for-hire trucking services—with both dedicated fleets and
individual lane contracts. O ne of the challenges that Wal-Mart
faces is determining, at a strategic level, when and where to
use these different types of transportation resources. Each type
of resource (private fleet, dedicated fleet, and for-hire carrier)
has a different cost structure and risk profile. Additionally,
the number of loads on each lane within the freight network is
variable as well as uncertain.
The MIT Center for Transportation and Logistics
is working with Wal-Mart to address this challenge by modeling
its transportation requirements as an exceptionally large-scale
stochastic network and developing evaluation algorithms based
on a multi-dimensional stochastic linear program utilizing column
generation. The model makes recommendations on fleet assignment
based on both direct costs and coverage risks. Because each lane
is part of the network, neither the costs nor the risks are independent—the
model must take both of these network effects into account.
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Wal-Mart uses sophisticated mathematical algorithms
to contract for and operate the vast transportation network
(right) that supports its operations. Optimal capacity allocation
(above) is based on the company’s sensitivity to the
risks of having either too many trucks contracted or too
few available to carry the loads. The relative magnitude
of these two distinct risks determines how much of each
type of transportation asset to allocate. (click chart to
view larger image)
The graph is based on
the work of CTL researcher Francisco Jauffred. Image courtesy
of Wal-Mart
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This work is currently extended to model how recycling
system policy and architecture influence recovery economics and
effectiveness; the potential for technological solutions to mitigate
the deterioration of secondary resources; and the role of recycling
to manage volatility and scarcity in the larger materials system.
Caplice, C . and Y . S heffi, “Combinatorial
Auctions for Truckload Transportation,” in Cramton, P. et
al (ed.) Combinatorial Auctions, MIT Press, 2006.
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