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The formula can save manufacturers nearly 10 percent in distribution costs to retailers annually, the school said. The tool considers various elements that affect distribution costs, and offers a structured approach to negotiating customized rates with third-party logistics (3PL) providers. The model was developed by Hari Natarajan, associate professor of operations and supply chain management at the University of Miami, along with a professor from the University of Texas at Austin. It frames the problem of negotiating delivery fees as an optimization model that considers the distance of each store from the distribution center, the probability of delivery weights to each store, and the total delivery cost incurred by each 3PL provider. It then offers a tailored solution that takes into consideration both industry benchmarks and the specifics of the manufacturer-3PL partnership.
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