TNT achieves $260 million in cost savings with AIMMS-based optimization

About the company

TNT (now FedEx) is one of the world’s largest express delivery companies. On a daily basis, TNT delivers close to one million consignments ranging from documents and parcels to palletized freight. The company operates road and air transportation networks in Europe, the Middle East and Africa, Asia-Pacific, and the Americas. TNT made €6.7 billion in revenue in 2014.

Note: In 2016, FedEx acquired TNT Express.

Challenge

TNT Express delivers over 4.7 million parcels, documents, and pieces of freight weekly to more than 200 countries, all while maintaining strict service requirements. Until 2005, TNT Express’ decision-making for its complex logistical operations did not utilize mathematical support.

However competitive challenges convinced company leaders that to remain relevant and effective, they had to take a more fact-based and analysis-driven approach to decision-making. The worldwide financial crisis of 2008 further amplified their immediate need for targeted and advanced optimization.

Solution

TNT decided to embrace Operations Research as a corporate solution and quickly assembled a team of specialists that included Hein Fleuren, Professor of Operations Research at Tilburg University, and multiple consultants from ORTEC, a long-time AIMMS partner.

The team started with basic data analysis compiled from separate commercial, financial, and operations systems, and began to analyze local management data. That was a relatively easy job to do in AIMMS. Based on the insights from this initial analysis, they identified and implemented changes that led to an immediate cost reduction of 6.4%.

This early success led directly to the development of the TNT Express Global Optimization (GO) Program, which is a two-year training program for managers to learn how to apply the principles of optimization to their daily operations.

Following the successful implementation of this program, the team started optimizing TNT’s parcel and freight flows in Europe using AIMMS-based models. End-to-end operational supply chain costs and services are now quickly and easily considered to produce the most efficient distribution network possible.

Results

Beyond TNT’s obvious financial and emissions accomplishments, TNT has succeeded in creating an environment of optimization with the creation of the GO Academy. TNT’s tremendous advances in site location planning, truck routing, fleet management, and staff scheduling also led them to win the internationally renowned Franz Edelman Award in 2012.

• $260 million in cost savings
• Carbon footprint reduced by 283,000 metric tons
• 200+ managers equipped to perform strategic
• optimization and apply optimization techniques across TNT’s networks and operations

Solution implemented by AIMMS partner: