EPG’s Routing Solution Greenplan Debuts Fair Cost Allocation for Logistics Operations
EPG (Ehrhardt Partner Group) is proud to launch a globally unique capability for its routing SaaS Greenplan: Fair Cost Allocation. This algorithm, co-developed with the University of Bonn, is the first in the world to accurately calculate the true costs—both financial and environmental—of delivering individual shipments in a network. Applying discrete mathematics to real-world logistics, Fair Cost Allocation equitably distributes costs and CO2 emissions across customers to enable smarter shipment assignments and smoother execution. Fair Cost Allocation is powered by discrete mathematics and the research of Prof. Dr. Jens Vygen and his team at the University of Bonn.
The solution adapts the “Nucleolus” concept from cooperative game theory to address the intricacies of delivery cost calculation, one of the biggest unsolved challenges in logistics. The result is an optimized algorithm – built upon the concept of the “Happy Nucleolus” – that allocates costs without burdening any one shipment, route, or network with an unfair share of the load. A Fundamental Challenge in Logistics Rivaling the complexity of route planning itself, Fair Cost Allocation empowers companies to calculate the cost of their operations with newfound precision.
In traditional systems, calculating the cost of shipments across a delivery network involves rough estimates, leading to inaccuracies and inefficiency. The Fair Cost Allocation algorithm provides a data-driven method that analyzes factors such as time sensitivity, geographical distance, delivery density, and operational constraints for each shipment. Consider a shipment with a tight delivery window of 30 minutes in a neighborhood with few other deliveries. This shipment is inherently more expensive to deliver due to the restricted timeframe and inconvenient location, but it’s important to determine how much of that cost is fair to assign to the shipment. Most companies serve multiple customers.
The new algorithm evaluates the resources required for shipments on their own and then within a multi-customer network. This information is valuable to the route planning process and can be used in combination with EPG´s core routing algorithm Greenplan to further optimize dispatch. Using detailed logic, Fair Cost Allocation can distribute costs fairly among shipments and make informed assignment decisions. This intelligence can additionally be used to minimize penalties for dropped or delayed shipments by prioritizing orders in a way that causes least harm. CO2 Allocation and Environmental Impact In addition to financial cost calculation, the algorithm can tackle the growing need for sustainability in logistics by considering CO2 emissions.
A shipment requiring express delivery to a distant location contributes more greenhouse gases than a local delivery with flexible timing. Fair Cost Allocation identifies the environmental impact of each shipment and then reconsiders the cost in a multi-customer situation, assigning each shipment a new fair share of the total emissions generated by a network. This is particularly valuable for companies that want to comply with CO2 caps, include sustainability metrics in their operations or inform customers of their individual environmental impact. How the “Happy Nucleolus” Works In the recently published paper “Cost Allocation for Set Covering: The Happy Nucleolus,” Dr. Vygen et al. from the University of Bonn establish the rationale of fair cost sharing, a rationale which Greenplan then applies to the context of routing. Every company has a certain number of customers requiring deliveries each day.
The challenge that the “Happy Nucleolus” solves is assigning a fair cost to each customer so that any group of these customers is happy, benefiting from inclusion in the network. The algorithm considers the cost of service for each group if they acted alone and compares it to the assigned cost share of the group in a full network. If a group pays less in the assigned setup than they would on their own, they are considered “happy”.
