Volkswagen Group Logistics Applies Operations Research to Optimize Supplier Development

Volkswagen Group Logistics (VWGL) is responsible for the logistics and supply processes of the automotive brands of the Volkswagen Group. In this context, supplier development is vital for efficient and reliable material flows between the process partners. In recent years, VWGL implemented a collaborative approach for supplier development in logistics wherein it is crucial to identify disrupting suppliers and apply improvement measures to increase their logistics performance. Against this background, VWGL initiated a project to examine how supplier development measures can be implemented efficiently to improve the overall logistics performance of VWGL's supply base. This paper presents the developed operations research approach, which integrates Monte Carlo simulation and a knapsack model on the specific problem of supplier development. The approach consists of three stages: (1) data preparation, (2) measure evaluation, and (3) measure allocation. The approach is validated based on 18 existing less-than-truckload networks of VWGL. We find that, on average, considerable cost savings of 31% can be achieved throughout the networks compared with VWGL's previous procedure. A new workflow facilitates our approach to lift its potential in practical application sustainably.