The Logistics of Volkswagen Development Center Applies Operations Research to Optimize Transshipments

Volkswagen Technical Development (TE) is responsible for all prototype development and prototype production for the Volkswagen brand and has its own logistics department (TE-Logistics). In the logistics of prototype parts in the automotive industry, new versions of prototype parts (henceforth referred to as updating parts) are repeatedly assembled in finished prototype vehicles. These updating parts are stored in warehouses and provided to an assembly site to ensure a timely assembly of the associated prototype vehicles. As the internal warehouse on the company site is not large enough for the high variety of parts, an additional external warehouse in the logistics network is needed. However, since prototype parts are unique, the allocation of the parts in suitable warehouses is particularly important. Currently, the various warehouses and the short-term demands repeatedly lead to reactive transshipments between the warehouses. To this end, we developed an approach for proactive transshipments based on a machine learning forecast and a mixed-integer linear programming model for planning proactive transshipments of parts between the warehouses to minimize transport costs. The model is based on a probability estimation of future demands to anticipate the expected optimal warehouse. After the model had revealed high improvement potential through a case study with real-world data in terms of costs and availability time compared to the current reactive process, we derived decision rules and developed a rule-based heuristic algorithm that leads to the optimal solution for the industrial use case. We implemented the heuristic with a spreadsheet-based decision support system (DSS) for daily transshipment planning. After successful test implementation, TE-Logistics estimated the annual cost savings for transport to be approximately 10%.