European Journal of Operational Research 152 (2004) 382–398

www.elsevier.com/locate/dsw

Design of an IT-driven decision support system

for vehicle routing and scheduling
Sotiris P. Gayialis *, Ilias P. Tatsiopoulos
Section of Industrial Management and Operational Research, Faculty of Mechanical Engineering,
National Technical University of Athens, 15780 Zografos, Greece
Received 26 January 2001; accepted 23 October 2002

Abstract

This paper presents the development of a decision support system used by an oil downstream company for routing
and scheduling purposes. The studied problem refers to a complex delivery process of oil products from a number of
distribution centers to all customers. The latest rapid advance of operations research (OR) applications, in the form of
advanced planning and scheduling (APS) systems, has shown that OR algorithms can be applied in practice if (a) they
are embodied in packaged information technology (IT) solutions, (b) the interface problems to mainstream ERP
software applications are solved. In this study the utilisation of advanced IT systems supports effectively the planning
and management of distribution operations. The combination of a supply chain management (SCM) application with a
geographical information system (GIS) integrated with an enterprise resource planning (ERP) software resulted to this
innovative decision support tool. The objectives of this new tool are: optimum use of the distribution network re-
sources, transportation cost reduction and customer service improvement. The paper concludes with the benefits of the
new system, emphasising at how new technologies can support transportation processes with the help of operations
research algorithms embedded in software applications.

2003 Elsevier B.V. All rights reserved.

Keywords: Decision support system; Supply chain management; Routing; Information systems integration; Oil industry

1. Physical distribution and vehicle routing
Physical distribution, as a component of the
supply chain, includes a set of activities executed
to obtain the delivery of a product from the pro-
* Vehicle routing [23] refers to a broad group of
Corresponding author. Tel.: +30-10-7722384; fax: +30-10-
7723571.
E-mail addresses: sotga@central.ntua.gr (S.P. Gayialis),
itat@central.ntua.gr (I.P. Tatsiopoulos).
duction location to the end customer [26]. Prob-
lems related to physical distribution are: selection
of distribution channels, determination of cus-
tomer service level, distribution centersÕ location
planning, inventory management, transportation
means selection, fleet composition, delivery
scheduling and vehicle routing.
problems that could be expressed as following: a
finite set of customers at fixed locations with de-
fined demand, must be supplied with goods by a

0377-2217/$ - see front matter
2003 Elsevier B.V. All rights reserved.
doi:10.1016/S0377-2217(03)00031-6
 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398
number of vehicles having a finite capacity and
predefined starting points and terminals. The ve-
hicle routing and scheduling problem consists of
two sub-problems: the customer grouping to routes
(clustering) and the definition of the optimum tour
for every route (cluster). Therefore, route is the
total number of deliveries made by a single vehicle
and tour is their sequence. The solution of these
sub-problems results to the routes and tours that
minimise the total transportation cost.
Vehicle routing and scheduling performed in
the supply chain context is a complex process.
Alter [1] offers a simple definition of a systemÕs
complexity in stating that it is a function of
the number of differentiated components and the
number and nature of their interactions. The
characteristics that Alter describes can be com-
pared with those to which Scuricini [31] refers,
who identifies four attributes of complexity:
numerosity of components, variety of components,
type of components and organisation. The com-
plexity of vehicle routing and scheduling process
lies on the fact that there are many constraints and
parameters to consider, concerning the available
transportation means, the products, the depots,
the customers and the road network [20].
A companyÕs dispatcher is usually responsible
for the execution of the described complex process,
which is focused on the effective resource planning
of the distribution system so that the products are
delivered to customers on time. The effectiveness
of the process suggests a balance between the high-
level customer service and the corresponding total
cost. The dispatcherÕs tasks that are managed by
the designed system include customer allocation to
distribution centers, customer order grouping and
dispatching to the vehicles, as well as determina-
tion of the sequence of deliveries.
2. The integration of information technology and
OR algorithms
2.1. Heuristics for the vehicle routing problem
Many authors have suggested a number of so-
lution methods for the vehicle routing problem.
Heuristics have been developed and applied to
383
many routing and scheduling case studies and
several researchers have compared and evaluated
these methods [5,15,17,21,22]. The advantage of
the heuristics is their ability to handle efficiently a
large number of constraints and parameters of the
routing problem. They perform a relatively limited
exploration of the search space and generally
produce good quality solutions within modest
computing time. Therefore, classical heuristics are
still widely used in commercial software packages.
Heuristics for the vehicle routing problem can
be classified into two main classes: classical heu-
ristics, developed between 1960 and 1990 and
metaheuristics whose growth has occurred in the
last decade [22]. The most well known classical
heuristics are the Savings and Sweep algorithms.
The most successful metaheuristic approach is the
tabu search heuristics.
In terms of the solution procedure, classical
heuristics can be classified in sequential and paral-
lel. Sequential heuristic algorithms solve the vehicle
routing sub-problems (clustering and finding best
tour) separately and consecutively. Parallel heuris-
tics produce routes and tours concurrently and can
be classified in construction and improvement
methods. Clarke and Wright [7] developed a par-
allel heuristic, known as the Savings algorithm.
Sweep algorithm, which is attributed to Gillett and
Miller [16], is the most common sequential heuris-
tic. Other classical heuristics include sequential
improvement methods, insertion methods [24], ex-
change algorithms, petal algorithms, cluster first
route second algorithms, nearest neighbour and
simulated annealing methods. In metaheuristics,
the emphasis is on performing a deep exploration of
the most promising regions of the solution space.
These methods typically combine sophisticated
neighbourhood search rules, memory structures
and recombination of solutions. The quality of
solutions produced by these methods is usually
much higher than that obtained by classical heu-
ristics but the computing time is increased.
2.2. Advanced planning and scheduling systems: The
OR practice using IT
Modern information technology supports the
definition and analysis of the factors influencing
384 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398

the routing process, a problem difficult to solve
using empirical methods. Nowadays, there are
software applications that manage supply chain
processes at all three decisional levels of manage-
ment (Table 1), including features of transporta-
tion planning and execution:
• high level (strategic)––these applications offer
transportation planning and fleet composition
modules;
• middle level (tactical)––these applications allo-
cate resources to the general transportation
plan derived from the previous level;
• low level (operational)––at this level the appli-
cations are oriented to detailed scheduling of
routes and tours on a daily basis.
The mathematical technique most commonly
applied to strategic transportation planning is
linear programming and related algorithms like
network optimisation and mixed integer pro-
gramming. Linear programming based approaches
model the current transportation business includ-
ing revenues and costs. The models are extended to
include decisions on the location of new facilities,
acquisition of transport resources and implemen-
tation of transport strategies [32]. These applica-
tions date back to the 1970Õs and many companies
have taken this approach [14]. Transportation
planning applications at the tactical level include
linear programming based models similar to the
ones mentioned above. Their functionality is
found in most ERP systems. The operational level
applications utilise mostly heuristic algorithms.
These algorithms can find a near-optimum solu-
tion for complex and multi-parameter problems in
short time.
As early as the 1960Õs, papers were published
which claimed to solve a problems of generating
distribution schedules. The methodologies were
seen by many computer manufacturers, as ‘‘pro-
grammable’’ [23]. Although serious efforts were
done since the 1970Õs, to embody OR algorithms in
computerised routing and scheduling systems, they
were seen to fail due to insufficient consideration
of additional features required (e.g. graphical in-
terface, road network modelling, decision-making)
and low computational capabilities of the systems.
Today, the advanced computer programming
languages and the powerful hardware supports the
use of these algorithms in advanced planning and
scheduling (APS) software systems. The ability to
implement APS systems as a decision support tool
directed in transportation, has been greatly en-
hanced by improvements in telecommunications,
better supply chain management systems, more

Table 1
Supply chain processes and decisional levels
Supply chain planning Transportation planning Shipment planning Vehicle routing Warehousing
Strategic Site location Site location Outsourcing Fleet sizing Warehouse layout
Capacity sizing Fleet sizing Bid analysis Service day balanc- Material handling
ing design
Sourcing Distribution centersÕ Fleet sizing Frequency analysis Control systems
allocation

Tactical Production planning Transportation strategy Consolidation Routing strategy Storage allocation
strategy
Sourcing Network alignment Mode strategy Zone alignment Order picking strat-
egies
Inventories planning
Opera- Material requirements Load consolidation Shipment dispatch- Vehicle dispatching Order picking
tional planning––MRP ing
Distribution require- Timing and volume of
ments planning––DRP movements
Enterprise resource
planning––ERP
 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398
comprehensive ERP implementations, and more
powerful forecasting tools [32].
The 1990Õs have seen a revolution in computer
and information technology that has had a sig-
nificant affect on the OR practice [12]. Recently the
field of operations research has greatly influenced
by the electronic revolution, causing the practice of
OR to be more widespread than in previous de-
cades. The power of OR models and optimisation
methods can be enhanced incorporating them
within a decision support system, which takes ad-
vantage of modern information technology.
Many case studies concerning OR computer
applications in routing and dispatching problems,
can be found in the literature. A problem of op-
timising routes and scheduling of freight opera-
tions solved by a combination of heuristics and
integer programming [18]. A problem of delivering
orders to customers homes and dispatch techni-
cians to service customers is solved by a cluster-
first-route-second heuristic [36]. The problem of
picking and delivering products to dairies is solved
by a tour construction/improvement heuristic [28].
A DSS for a dairy companyÕ vehicle routing and
scheduling includes the sweep algorithm of Gillet
and Miller [16] to schedule the trips of the tank
trucks and a farthest insertion algorithm to de-
termine the sequence of the loading points that
minimise the distance traveled for each trip [19].
3. Decision support systems construction
The decision support system (DSS) has emerged
as a computer-based approach to assist decision-
makers to address semi-structured problems by
allowing them to access and use data and analytic
models [34]. Such a system does not replace the
decision-maker. It supports the decisions where
part of the analysis can be systematised for the
computer, so that the decision-makerÕs insight and
judgement are improved [19]. It is often amenable
to modelling, OR-techniques and graphical pre-
sentation for parts of the overall scenario.
In the last 20 years, the availability of increas-
ingly powerful computers at a decreasing cost, on
one hand, and advances in operations research/
management science that have resulted in im-
385
proved algorithms, on the other hand, have made
it possible to solve larger and more complicated
problems than ever before [11]. The need of an
optimisation-based decision support system, which
can also be viewed as an application-specific de-
livery system for an optimiser engine [13], arises
when OR technology can be used to support
highly repetitive decisions, such as daily vehicle
routing problems.
The process of constructing a decision support
system requires developing complex mathematical
models, using specialised algorithms to solve these
models, handling large amounts of input data, and
interpreting of output data. Because of the com-
plexities and the different kinds of knowledge re-
quired, constructing this type of system tends to be
a time-consuming and expensive software devel-
opment project, which requires many hours of
work of a team of computer programmers and
operation researchers. Until now, however, there
have been relatively few tools that have been
proposed for supporting this process. Although
important advances have been made in the devel-
opment of modelling systems and modelling
management systems [4], most of the tools that are
in use are intended to support the operations re-
search practitioner in modelling and solving the
problem. Interesting works in the area of devel-
oping tools to support DSS development can be
found in [2,25].
Relative work in the field of DSS development
for dispatching purposes, can be found since 1987
in [6], where is described an integrated, automated,
real-time computer system for centralised control
of distribution to customers of light petroleum
products. The implemented system includes a
collection of integer programming methods used
within a real-time, transaction-driven information
management system and exploits the experience
and knowledge of the human dispatchers. Another
case study of a solution used at an oil downstream
company is indicative of the approaches used for
routing single and multi-compartment bulk
movements [27]. The implemented dispatching
system consists of models and algorithms, together
with user interfaces for input and output sides, as
well as databases and data management routines.
Ronen [27] agrees that the rapid development of
386 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398
computing power, combined with the development
of ever more efficient algorithms, has facilitated
the recent emergence of optimisation models in
transportation dispatching systems. The develop-
ment of a system that dispatches truck shipments
of heavy petroleum products, using nonhomoge-
neous fleet of companyÕs controlled and contract
vehicles is described in [3]. A constraint-based ve-
hicle scheduling system for an oil and bitumen
company is described in [10]. The paper presents
the development of an application using the
modules of optimisation-specific software and it
consists of a front-end data management system
and a scheduling system.
Our study targeted at the design of an IT-driven
system for decision-making concerning routing
and scheduling in oil downstream operations. The
concept was not to develop a system from the
beginning, as it would result to a lengthy and ex-
pensive software development project. Hence, the
design of the new system utilises the advanced
planning and scheduling capabilities of OR meth-
ods embedded in commercial software applica-
tions, the efficiency of a graphical user interface
and the complementary geo-reference abilities of a
GIS. The DSS design methodology emphasises
process modelling and analysis in order to lay out
the exact system specifications and evaluate the
Fig. 1. Enterprise supply chain.
functionality of the proposed applications. A spe-
cial issue is the selection and integration of the
overlapped functions of the software applications
selected.
4. Case study: An oil downstream company
4.1. The considered distribution system
The case study is an oil downstream company,
which is the commercial subsidiary of a group of
oil companies. Sales and distribution cover the full
range of petroleum products (petrol, diesel, fuel
oil, aviation fuel, liquid gas, lubricants and as-
phalt) both in the domestic market (petrol sta-
tions, retail and industries) and the transit business
(aviation and marine).
The enterprise supply chain (Fig. 1) is com-
prised of the vendors (refineries and third party oil
companies), the fuel depots–terminals and the final
customers. The products are distributed using
chartered ships, pipelines, barges, tank trucks and
rail. The majority of deliveries is accomplished
with surface transportation means, especially tank
trucks. A high percentage of these trucks (85%) is
hired, including dedicated contract carrier trucks
and a few common carrier trucks. The fleet is
 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398
composed of 190 trucks of various types with
different compartment capacities. The distribution
responsibility regions are divided into northern,
southern, central and western Greece. Each dis-
tribution center corresponds to one responsibility
region and each region includes many storage fa-
cilities. Consequently, each distribution center is
liable for the planning and routing of deliveries to
regional customers.
4.2. Problem definition
The oil company requires a decision support
system for efficient distribution planning and
control. The major requirement is the support of
the dispatcherÕs decisions in scheduling the deliv-
eries and routing all the tank trucks to the cus-
tomers, which is a hard work especially if executed
manually. The dispatcher must attend to many
details concerning customer, vehicle fleet and
product status. The cost of distribution is very
sensitive to dispatching decisions and even small
errors can disrupt daily operations. Apart from
delivery scheduling and vehicle routing, the new
system must include other distribution operations
such as customer order processing, invoicing, bill
of lading control, dispatch reporting and what–if
scenario analysis. The objectives of the new sys-
tem are to minimise the total transportation cost
of deliveries, to balance the work load among the
tank trucks, and to load the maximum weight on
a truck while adhering to all rules of loading.
These conflicting objectives must be met within
the constraints of maintaining customer service
level.
As described previously, mainland distribution
is divided into four regions and each one has a
separate distribution center which manage several
storage facilities. Each of the facilities may have
different products available and the same product
may have storage cost at each terminal. The vari-
ous tank trucks are located to separate distribution
centers and the cost structure for each truck differs
between owned or hired. The hired trucks cost
depends on the travelled distance, the delivered
product and minimum charges restrictions. The
trucks may have different capacities, and different
numbers and sizes of separate bulk cargo com-
387
partments. In addition, assigning orders as loads
on trucks may require adjustment of ordered
quantities of products so that they fit into truck
compartments. An order usually consists of several
products and may require special delivery equip-
ment. The restrictions of the road network must be
taken into account as well.
The cited problem summary makes clear that
dispatching decisions are too complex for manual
optimisation. Dispatchers are usually looking for
acceptable feasible solutions, guided by simple
decision rules. In such an environment, dispatchers
cannot be expected to look for very low-cost so-
lutions. The IT-driven decision support system
aims at assisting the oil companyÕs distribution
operations at a lower cost. The vehicle routing and
scheduling system is focused either at decentralised
deliveries from distribution centers or at a cen-
tralised distribution system, which requires less
personnel and accomplishes better administration
and control.
5. Decision support system design methodology
The methodology followed in the case study has
similar phases to the information systems devel-
opment specialised at a decision support system.
Emphasis was given at system modelling and
process analysis, as this is the basis for exact sys-
tem requirements specification and successful de-
cisions regarding the software selection and
implementation. A combination of functions from
the selected software applications are integrated
in order to implement the decision support sys-
tem. The main steps of the methodology used
are:
• Data collection. Firstly, all necessary data is
gathered concerning process mapping, con-
straints, empirical optimisation rules, and the
information systems infrastructure.
• Distribution system modelling. This step deals
with the AS–IS analysis utilising modelling tools
like: flowcharts for the functions and activities,
data flow diagrams for the database and the in-
formation flow, GRAI diagrams for the deci-
sional view and the ARIS system architecture
388 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398
for the overall system view. The same tools were
used for the TO–BE analysis in order to con-
clude the systemÕs specifications.
• Software market research. International soft-
ware market research is the next procedure in
order to examine suitable solutions for distribu-
tion management and more specifically automa-
tion and optimisation of enterprise dispatching
processes.
• System requirements specification. After the
completion of the software market research, a
list of features of the most specialised software
concerning the current problem is deployed.
From that list and the TO–BE model the system
requirements are extracted in the format of a se-
lection criteria catalogue.
• Software selection. The criteria catalogue is for-
warded to pre-qualified software vendors as a
request for proposal (RFP). The company re-
ceives all proposals and after evaluating them,
the most suitable solutions are selected.
• Implementation of the new system. The selected
software applications are integrated in order
to implement the decision support system.
Fig. 2. Decision support system design methodology.
The case of fully customised development of
the suitable software was examined thoroughly
and it was found unacceptable due to the very
high costs and lengthy time horizon. However,
apart from the step of ‘‘software selection’’, all
other methodological steps could be the same in
the case of customised software development.
The framework of the methodology followed is
shown in Fig. 2 and is described analytically
below.
5.1. Data collection
All the information was collected by interviews
held with employees at all management levels,
corporate archives and past reports (historical
data). The specifications of the existing informa-
tion infrastructure (based on the answers received
through structured questionnaires) focused on
existing applications that support the distribution
processes.
The routing and scheduling parameters and
constraints were identified, too. The basic param-
eters and variables of the problem are product
 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398
availability, vehicle availability and capacities,
order priorities, customerÕs location and road
network structure. The basic constraints that in-
crease the complexity of the OR problem are listed
here:
• multiple alternative loading points which may
be different for some products within a trip;
• transportation with a variety of vehicles and
bulk compartments capacities;
• order quantities adjustment according to vehi-
cles compartments;
• hired vehicle work balancing;
• maximum use of the owned vehicles;
• vehicle rotation to the customers;
• several loading points for the same trip within
the regional area of each distribution center;
• complicated transport cost calculation which
depends on factors such as: category of deliv-
ered product, category and number of custom-
ers per route, customersÕ geographical
allocation per route regarding the loading loca-
tion of the vehicle;
• minimum transportation cost for last point de-
livery, regardless the delivered quantity;
• unplanned orders subsumption to the delivery
schedule.
Emphasis was given at the collection of the
empirical optimisation rules that are used by the
dispatchers. All collected data was analysed and
the results were used in the next phases of the
study.
5.2. Distribution system modelling
The second phase included the modelling of
the existing situation (AS–IS) and the new situa-
tion (TO–BE) as well. The objective was to map
in a structured way the distribution processes of
the oil company. The modelling tools and methods
applied in this phase were chosen in such a way so
that all the aspects of the distribution processes
were identified and analysed properly. The overall
outcome of the distribution modelling was a set of
complementary methodologies, each of which
contributes to that objective from a different per-
spective. More specifically:
389
 Flowcharts were applied in order to identify
the sequence of distribution activities, as well as
the decisions to be taken in various steps of the
distribution process. The flowchart models were
initially designed so that the personnel involved in
the distribution processes could review them. Their
simplicity allowed accurate definition of activities
and decisions in workflow among the different
departments of the company.
 The data flow diagrams modelled the infor-
mation flow in the distribution process. They were
based on the flowcharts and they were enriched in
order to define the different databases that should
be used in order to store critical data for the de-
cision support system. Data flow diagrams are an
asynchronous network representation of a system
and they are useful for modelling information flow
and data transformation through the system. They
are the cornerstone for structured systems analysis
and design [35]. The second level data flow dia-
gram in Fig. 3 depicts the data sources, destina-
tions, flows, data stores and transformations of the
studied system.
 The next modelling method that was applied
was GRAI (Graphes
a Resultats et Activites In-
terreliees), part of GRAI integrated methodology
(GIM). This method proposed by Doumeingts [8]
for handling the decisional view of a system with
GRAI-Grids and GRAI-Nets as mapping tools.
The GRAI-Grid provides a general view of the
decisional model, from a high-level perspective.
The main objective of the GRAI-Grid is to analyse
the functional areas of the system and to iden-
tify the most important decision centers that are
responsible for the decisions that are taken at all
decision-levels and consequently affect the activi-
ties of the lower levels of the system. A GRAI-Net
is associated to every decision center included in
the GRAI-Grid and consists of the constraints,
decision variables, performance indicators and
other parameters that characterise every important
decisional activity of a system. The input for these
models was the flowcharts and the data flow dia-
grams. The flowcharts provided the raw decisional
framework in order to model in detail the specific
decisional parameters of the distribution system.
Additionally, the data flow diagrams defined the
information flow in the GRAI-Grids constructed
390 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398
Fig. 3. Second level data flow diagram.
and the support information in the GRAI-Nets.
The GRAI-Net diagram in Fig. 4 depicts the de-
cision variables, the objectives, the constraints
and the other parameters of a decisional activity
and refers to orders allocation to truck compart-
ments.
 Finally, the ARIS system architecture [29] and
the related tool set was applied in order to provide
the overall distribution system model. In ARIS
architecture, the modelling is done using a tool set
instead of a language. Several sub-tools are avail-
able related to the examined problem. The infor-
mation captured by the ARIS tool set [30] is stored
in a database following the entity-relationship-
model (ERM). This architecture distinguishes be-
tween organisation, function, information and
control views of the system model. It focuses on
the analysis and requirements definition phase
during the design of information systems.
ARIS models used the flowcharts and data flow
diagrams in order to develop the function trees, the
organisation trees, the entity-relationship diagrams
and the event-driven process chain (EPC) diagrams
of the distribution system. The event-driven pro-
cess chain of the ARIS methodology for a very
small part of the process ‘‘Inventory status con-
trol’’ is seen in Fig. 5. This diagram used for rep-
resenting the control view of the model and
combines the function, information and organisa-
tion view in a single diagram. Function trees used
for modelling the function view of the system. A
part of a single function tree (without alternative
trees) is shown in Fig. 6. The contribution of the
ARIS tool set lies on the fact that it supports
the implementation of the new ERP system of the
company. It describes very accurately the infor-
mation that is exchanged throughout the distribu-
tion system and provides the organisational view of
 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398 391

Fig. 4. GRAI-Net diagram.

Fig. 5. Single step of an event-driven process chain diagram of ARIS methodology.

the company where the different departments in- added value in this step and are connected to each
teract in order to support the distribution process. other. There is a gradual relation in the modelling
To conclude with, the four modelling method- process: the flowcharts and data flow diagrams are
ologies presented above, exhibit a complementary a first approach of analysis and the GRAI and
392 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398
Fig. 6. Part of a single function tree of ARIS methodology.
ARIS models are based on their input, describing
the distribution system in more detail.
After the modelling process was completed, it
was shown that the distribution system involved
many parameters that were never taken into con-
sideration before, such as the delays caused from
the interactions of the different departments in the
distribution process. The existing situation (AS–
IS) modelling resulted to identification of the
weaknesses and problems of the studied processes.
The results also included the detailed definition
of the objectives, the constraints and the variables
for the major decisions taken into account and
the sizing of the required decision support tool.
The TO–BE models included the solutions to the
identified problems and they were considered as
the basic resort for the systemÕs requirements
specification and the software selection phases.
5.3. Software market research
The software market research that followed had
two goals. The first was the study of the supply
chain management (SCM) applications and their
efficiency in working out problems similar to ours.
These applications support the supply chain ac-
tivities of a company from the high level (strategic
decisions) to the low level (routing and schedul-
ing). The second one covered the geographical
information systems (GIS) applications integrated
with add-on software modules responsible for
routing and scheduling, so that they function on a
common database allowing querying, statistical
analysis and user-friendly visual mapping of the
transportation network. The market research was
conducted by using the Internet and contacts with
a large number of software vendors. Several
packages were identified from the international
market research that cover the two areas as shown
in Fig. 7. Summary tables of the software packages
functionality created in order to categorise, review
and compare the abilities and features all of them.
Fig. 8 depicts one of these tables.
5.4. System requirements specification
The next phase aimed at the extraction of
specifications for the new decision support system.
The applications surveyed in the previous step
were analysed as far as their features are concerned
and function maps were created for each software
package. These function maps were matched to the
results of the TO–BE analysis and appropriate
indicators were assigned to the functions that
corresponded to the requirements of the TO–BE
model. The result of this phase was lists of func-
tional and technical specifications broken down in
four levels of details. A sample of the produced
lists of specifications is shown in Fig. 9.
The structured and detailed process analysis
was critical for the success of the systemÕs analysis
and requirements specifications. The detailed
functional and technical specifications that re-
sulted from this phase, showed the most suitable
applications during the software selection phase.
5.5. Software selection
All data was gathered and put into tables for
evaluation purposes. This process pointed out that
no software application alone could cover the re-
quirements, as determined through the systemÕs
specifications. Consequently, it was obvious that a
combination of different applications was neces-
sary for the new system to work according to the
companyÕs requirements. A detailed study of the
functions of the available applications concluded
that there are overlapped areas between ERP,
S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398 393

Fig. 7. Software vendors resulted from market research.

Fig. 8. Software packages features review by vendor.

394 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398
Fig. 9. Two levels of system specifications.
SCM and GIS applications. A representation of
the overlapped areas, at a high level of function-
ality, is shown in Fig. 10.
The most suitable software solutions resulted
from this phase, from the supply chain manage-
ment area, were the applications of two software
vendors that are specialised in oil industry and
have plenty of successful stories. Besides an ad-
vanced optimisation tool was examined closely as
it had full compatibility with the companyÕs ERP
system. Two software vendors resulted from the
GIS area research. Fig. 11 depicts the soft-
ware applications that pre-qualified from SCM
and GIS areas, during the software pre-selection
phase.
The next stage was the submission of a RFP to
the pre-qualified software vendors, including the
requirement for a presentation of their proposal.
After that, the evaluation of the proposals took
place based on criteria catalogues. The result was
the selection of specific functions of the final ap-
plications in order to deliver the new decision
support system to the company.
5.6. Implementation of the new system
The final phase of the project includes the
purchase of the software applications, the design
and implementation of the interfaces with the
companyÕs ERP system and the final implementa-
tion of the integrated system. Due to the over-
lapped areas between the functions of the
companyÕs ERP system and the examined SCM
and GIS applications, the careful selection of
specific functions from each application, is the
basic factor for the successful implementation of
the new integrated solution.
The selected GIS and SCM applications include
digital maps and optimisation tools respectively.
The combination of these features executes distri-
bution scheduling and routing on electronic maps
utilising geo-reference capabilities, advanced
scheduling techniques and a friendly graphical
representation of the result. Additionally, back-
office activities of the dispatching process, such as
financials and reporting, are managed by the leg-
acy ERP system of the company that serves as the
 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398
Fig. 10. Overlapped areas between ERP, SCM and GIS applications.
Fig. 11. Pre-qualified SCM and GIS applications.
core database for the SCM and GIS modules. The
chosen SCM application is oil industry specific,
including planning and scheduling modules and
the appropriate algorithms for multi-criteria
routing and scheduling problems that can be ad-
justed to the companyÕs individual needs, as they
were analysed during the modelling steps of our
methodology.
The architecture of the designed system includes
a central database managed by ERP system of the
company, but optionally it could be managed in-
395
dependently by the SCM application, fully inte-
grated with the ERPÕs database management
system. The main input to the planning and
scheduling modules are the daily orders and the
availability of the resources. The combination of
the suitable algorithms, the geo-reference data and
the user-identified parameters of the routes result
to the schedules of deliveries and the appropriate
routes of the vehicles. The dispatcher, who is ac-
tually supported to his decisions, can modify final
schedules. The designed systemÕs architecture is
shown in Fig. 12.
The success of the designed new system is that it
saves dispatchers time, creates valuable flexibility
and improves the quality of decision-making. The
system creates schedules, chooses plans between
alternatives, creates routes for the vehicles, mini-
mises the total distance travelled (which is a crucial
factor for the transportation cost) and allows the
dispatcher to modify the routes manually.
The major scope at this phase is the evaluation
of the algorithms and optimisation methods used
by the selected applications as well as the effec-
tiveness of the new system related to potential cost
396 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398
Fig. 12. Decision support system architecture.
savings and service level improvement. Since the
cost of investment in software applications for the
integrated solution is high (about 1.5 million
euro), a budgetary analysis of the costs and ben-
efits interceded the purchase and implementation
of these applications. The estimation of the bene-
fits was executed by using the activity based cost-
ing (ABC) technique [33], based on the REALMS
methodology [9], supported by the European Es-
prit programme. This methodology resulted to the
cost calculation and performance measurement in
order to define the cost benefits of the new system.
Using the ABC technique, specific performance
indicators were identified, corresponding the ob-
jectives of the distribution process and cost drivers
were set for the activities that have high cost for
the oil company. The result was the following es-
timated benefits by the new system:
• Reduction of the transportation cost for the
hired vehicles 8%, due to the reduction of the
total kilometres travelled and the more efficient
schedules. This reduction means savings of
470.000 euro per year. In addition there is a bet-
ter control of the charges of the hired fleet and
prevention of overcharges.
• Improved utilisation of the fleet 11% and conse-
quently of the fixed costs of the vehicles. The
required number of hired vehicles is reduced
which means less additional costs of the hired
fleet. The estimated savings due to the better
utilisation of the fleet are 40.000 euro per year.
• The savings from the reduction of the personnel
for order receiving and dispatching are esti-
mated to 390.000 euro per year in the case of
the decentralised distribution (45% less person-
nel) and 700.000 euro per year for a central sys-
tem (80% less personnel). The personnel
reduction is a result of the automated order re-
ceiving and dispatching processes and the re-
duced lead times.
• More effective processes, reduced lead times for
the dispatching process and fewer mistakes
(<1%), imply to customer service improvement.
The companyÕs profit calculated to 250.000 euro
per year.
6. Conclusions
The combination of carefully selected functions
of different software such as SCM applications and
GIS with an existing ERP system, resulted to the
elaboration of a decision support system for the oil
downstream industry. The new IT supported sys-
tem automates the complex routing and scheduling
 S.P. Gayialis, I.P. Tatsiopoulos / European Journal of Operational Research 152 (2004) 382–398
process, handles the vehicle routing problem effi-
ciently and manages transportation processes at
both the operational and the tactical decision-level.
Dispatchers can have an advanced decision sup-
port tool that assist them effectively to take the
right decisions depending on the various constraints
of the daily routing and scheduling problem.
The structured and detailed analysis of the
processes is the basis for the exact systemÕs re-
quirements specification, the selection of the most
suitable software applications and the implemen-
tation of the integrated system.
The advantages of the designed solution are:
• multiple what–if scenario analysis;
• short time in finding the best solution for vehi-
cle routing and scheduling problem;
• improved management of the distribution re-
sources;
• user-friendly graphical interface.
The combination of advanced computational
OR-techniques with a friendly graphical user in-
terface (GUI) proves to be adequate for the
management and optimisation of the companyÕs
distribution system. Nowadays, this combination
offers the advantage of the new IT technologies
compared to traditional management methods and
it is the basic component of the designed IT-driven
system to accomplish vehicle dispatching for oil
downstream companies.
The new IT-based system enables the studied
company to gain:
• better utilisation of the distribution resources
(utilisation of fixed cost);
• reduction of the cost of owned vehicles and
hired vehicles (major distribution cost);
• reduction of the labour cost;
• more effective processes;
• customer service level improvement;
• support of the operational decisions;
• a strategic and tactical decision support tool as
well.
The new system is a platform for the oil
downstream industry to create knowledge that
could not be perceived in the past in order to study
397
future strategic moves, such as the centralised
management of customer order business process or
the sustention of the current decentralised way of
vehicle routing.
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