Proposal for improvement in maintenance and logistics
according to Linear Scheduling, KPI and EOQ to reduce
cost overruns at Di Bacco Transporti SRL
Proposal for improvement in maintenance and logistics according to Linear Programming, KPI and EOQ to reduce
cost overruns in Di Bacco Transporti SRL
Anghela Brianna Miller1, María Sofía Carolina Muñiz Luna Victoria1 and Michele Simone Dellachiesa2
1
Bachelor of Industrial Engineering, anghela.miller34@gmail.com , carolinamlv213@icloud.com
2
Master of Research and University Teaching, michele.dellachiesa@outlook.com
Abstract – The research carried out sought to determine to
what extent the proposal for improvement in maintenance and
logistics according to linear programming theory, KPI and EOQ
influences the cost overruns of the company Di Bacco Transporti
SRL Visits were made to the company, interviews with the heads of
the analyzed areas and a review of documents delivered by them;
then the respective mathematical calculations of the collected data.
It was determined that the cost overruns in both areas were
$108,182.27. An improvement proposal was designed integrating
linear programming, KPI, EOQ and the results of implementing it
in the company were simulated in ProModel. It was determined
that the cost overruns after the improvement proposal represented a
reduction of 8 5.64% and a monetary benefit of $92,648.08. The
proposal obtained an IRR of 68%, an NPV of $25,285.05 and a B/C
of 3.29, indicating that it is profitable to implement it.
Keywords– Cost overruns, maintenance, logistics, cargo
transportation.
INTRODUCTION
Today, there has been a growth in the cargo transport
service due to the COVID-19 pandemic, due to the purchase
of materials and the transfer of goods that organizations have
needed for the gradual reactivation of their operations [1].
For this reason, transportation is one of the priority
activities in the supply chain, due to the fact that organizations
from different sectors cannot carry out their operations in the
absence of the transfer of their merchandise [2]. Thus, freight
transport allows carrying out the distribution process from a
starting point to the final destination, where the behavior of
this process is not carried out in a unidirectional manner,
likewise, the efficiency and quality of the freight transport
service will depend of the levels of performance and
competitiveness of the sector and of the country where said
process is carried out [3].
As for the cost overrun, it is said to be the relationship
between the real final costs of a project and the estimate made
[4]. It is also understood as the amount by which the actual
cost exceeds the estimated cost, with the cost measured in
local currency, at constant prices and on a consistent baseline
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[5]. In addition, cost overruns are identified as the amount of
cash that has been invested and this exceeds what was initially
calculated [6].
Globalization has allowed the commercialization of goods
and services to be a reality even in the most remote places in
the world [7]. For this reason, logistics has become of great
importance for companies, it is no longer understood as
something complementary, since it has added a competitive
value to their merchandise, in order to cover the needs of their
consumers, carrying out an adequate logistics management
that is determined as a job involved with all areas of the
company [8]. For this reason, logistics is outlined as a
fundamental pillar in business strategies [9].
In the national context, Italy has a logistics and
transportation system that does not meet the requirements of
the productive sector, due to the lack of supply of value-added
services and operating structures, on the contrary, they result
in a high cost [10]. These deficiencies significantly influenced
the competition of the nation that is observed in the business
economy, since logistics costs form a large part of the global
cost of the product [11]. These were relatively high, since they
represent between 20% and 50% of the value of the product,
compared to other member countries of the European Union
where logistics costs range between 9% and 12% [12].
According to [13], the financial and commercial situation
of the region of Piemonte presented important investment
opportunities with minimal danger in different areas of the
economy, since the organizations focus their activities on
sector C of the citizenry, causing an economic increase for the
companies, specifically in heavy cargo transportation in the
region. However, a problem for this sector and logistics in
general is the lack of capacity of the road network around
large cities such as Torino [14]. These infrastructural delays
generate a negative impact on the economic growth and
competitiveness of the country [15].
Likewise, with globalization and the obligation of
organizations to meet certain standards to be competitive, it is
essential that they have correct maintenance management in
order to keep their machinery, instruments and facilities in
optimal operating conditions [16]. This has a direct influence
on the production process, since any damage to the plant's
industrial equipment means an increase in operating costs and
a reduction in income [17]. According to [18], it was essential
to have a maintenance plan that reduces the chances of this
happening and that it is optimized, so as to add value to the
company [17].
On the other hand, according to [19] in Italy a permanent
financial and manufacturing increase has been perceived since
the first decade of the current century, being reflected in the
increase in the production of the different industrial sectors.
For this reason, it involved the availability of equipment and
safety, since it is not possible to work with a machine out of
service [18]. In addition, the handling of equipment generates
wear and tear and determines to carry out maintenance, fuel
supply, oil modification, or restoration, but carry out these
tasks with an economic approach and with an understanding of
the expenses involved, not only to be aware of them, but to
carry out supervision and administration [20].
Piemonte has become one of the most active cities in
economic terms in Italy [21]. In addition, organizations in the
transportation sector perceived the obligation to put into
practice and design strategies that repair their weaknesses and
intensify their strengths, through the implementation of
different methods and tools [22]. Likewise, to reduce
unjustified maintenance expenses, a failure analysis should be
carried out and the most serious identified, for the
implementation of a preventive maintenance program, with
the purpose of increasing the availability and reliability of the
equipment [18].
Given the importance of controlling cost overruns in the
study areas of this research, the proposal proposes the use of
three industrial engineering tools, described below.
Linear programming is a mathematical optimization tool
for resource allocation, through the determination of objective
functions and linear constraints [23]. Furthermore, they follow
the form (1) and (2), respectively [24]. The studies carried out
regarding transport models using this technique focused on the
design of distribution and other logistics activities of
organizations [25]. Likewise, the linear programming (LP)
used in transport models minimizes the total cost of transport
and managed to optimally balance supply and demand [26].
Z=C1 X 1 +C 2 X 2 + …+ Cn X n (1)
Subject to restrictions:
A11 X 1+ A 12 X 2+ …+ A 1 n X n ≤ B1
Where C n , A mn and B m are given constants.
According to what was mentioned by [27], the model of
economic order quantity (EOQ) is the quantity to order (Q)
determined with the cost contemplated through the volume
range provided by the seller for the rate agreed and will
largely depend on the different variables involved, expressed
in units per order as obtained from the calculation of equation
(3). Likewise, the storage cost generates a decrease in the size
of orders, however, it increases the processing time [28]. In
addition, the EOQ is essential for inventory models, since they
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detail the balance between the costs of ordering and the costs
of maintaining inventories, and it is also essential for the
evaluation of more complex systems [7].
√
2 DS
EOQ=
H
(3)
D: Annual demand in units.
S: Fixed cost of placing and receiving an order (ordering cost).
H: Annual inventory maintenance cost (holding cost).
This EOQ model is complemented by the use of equation
(4).
Inventory turnover =¿D/(Q/ 2+SS) (4)
D: Annual demand.
Q: Quantity ordered.
SS: Safety Stock.
According to [24], the EOQ model assumes that the
demand is known and constant; however, in most cases, this is
not true. That is why companies need to have security
inventories, which is achieved with the fixed order quantity
model that constantly verifies the level of stocks, which when
they reach a certain level R, indicates that they must be done.
new orders. For this, (5) and (6) are used.
Safety Stock=zσ T +L (5)
z: Number of standard deviations for a specific service
probability.
σ T+ L: Standard deviation of demand during the review and
delivery period.
R=d z L+ σ L (6)
R: Reorder point in units
d: Average daily demand
L: Lead time in days (time elapsed between making and
receiving the order)
z: Number of standard deviations for a specific service
(2) probability
σ L: Standard deviation of use during delivery time
On the other hand, [29] consider an indicator as a
quantified, verifiable interpretation, where the precise
information is entered, processed and exposed to calculate the
progress or decline of an established objective. Likewise, the
key performance indicators (KPI) reach two essential
functions, a descriptive one, which consists in the increase of
data according to the state in which the company is located,
and an evaluative function, which consists in adding said data
a judgment most likely objective value [30]. In addition, the
2
indicators are tools that serve to analyze an organization and
to approach its goals [31].
According to what was described, the research question
was formulated: To what extent does the proposal for
improvement in maintenance and logistics according to linear
programming theory, KPI and EOQ influence the cost
overruns of Di Bacco Transporti SRL?
The general objective was to determine to what extent the
proposal for improvement in maintenance and logistics
according to linear programming theory, KPI and EOQ
influences the cost overruns of Di Bacco Transporti SRL.
The specific objectives were:
1) Analyze the economic losses in maintenance and logistics
of the company and determine the cost overruns.
2) Carry out the design of the improvement proposal
according to the theories of linear programming, KPI and
EOQ.
3) Determine cost overruns in maintenance and logistics
after the improvement proposal.
4) Evaluate the improvement proposal economically and
financially.
The hypothesis of the proposed research was that the
proposal for improvement in maintenance and logistics
according to linear programming theory, KPI and EOQ
reduces cost overruns by 25% in the company of Di Bacco
Transporti SRL.
This research was justified in order to reduce logistics and
maintenance cost overruns in the company Di Bacco
Transporti SRL, to generate value in said organization. The
importance lies in the fact that, currently, companies seek to
minimize their costs by providing their services with the
greatest efficiency to all the stakeholders of the organization,
which are constantly evaluated throughout the logistics chain
[32]. In addition, by minimizing unnecessary maintenance
costs, and ensuring the proper functioning of the equipment
and machinery that participate in the production process,
companies can guarantee the quality of their efficiently
manufactured goods [16].
II. METHODOLOGY
The present investigation had a quantitative approach,
which aims to identify general behaviors that represent the
total of a studied population, based on the quantification of the
aspects investigated, through the use of theories with
In addition, this research was structured within the
descriptive-propositional type. According to [35], a
descriptive investigation is one that seeks real original
information that is generated from the imminent supervision
of the researcher and from the wisdom that is acquired through
the interpretation or analysis of the information provided by
several researchers. In turn, [36] pointed out that proactive
research consists of making a transformation proposal, where
a convincingly argued, proposal is built to overcome
deficiencies initially found.
On the other hand, according to [37], the population is an
integral group of components, with some usual features, which
are the object of study, in addition, a population could be
infinite or finite. In the current investigation, a finite
population was contemplated, due to the knowledge of the
specific data of the aspects presented by the study, which was
composed of the logistical and maintenance processes.
Likewise, the sample was a part or subgroup of elements of
the population, chosen in a representative manner [37].
Therefore, to select the sample, the non-probabilistic method
was used, selecting the elements that suit the researcher, which
were all the logistics and maintenance processes.
For the collection and analysis of data, the hypothetical-
deductive method was used, which is constituted by the
generation of hypotheses through two assumptions, one
universal and the other empirical.
III. RESULTS
A diagnosis of the company was made, through an
Operations Process Chart (OPC), a Process Analytical
Diagram (DAP), a Value Stream Mapping (VSM), 5 Whys
Analysis and the Ishikawa Diagram. The months from
September 2020 to August 2021 were taken as a reference for
the diagnosis and as an evaluation period.
Four economic losses and their associated root causes
were found, compiled in Table I. Next, the indicators and tools
to measure these problems were identified and improvement
proposed for each of these.
TABLE I
ROOT CAUSE INDICATOR MATRIX
No. Present
Improvement
Root Economic loss Root cause Indicator Value
tool
cause (Monetary)
Rush quotes Economic
Poor purchase
CR1 with a single
provider
planning
Order
Quantity
$3,898.59 EOQ

established concepts, in order to analyze them and measure unnecessary

Bad
Inventory Linear
CR2 management of $96,566.60
them correctly; therefore, this approach was used, since the orders
the logistics area
value in stock Programming

data collection used a numerical measurement to describe the Lack of Utilization

registration and
study variables [33]. On the other hand, it was of non- CR3
planning for
monitoring the
experimental design, because it is carried out without the maintenance
Performance

intentional handling of the researchers and only the problems area.

in their usual environment are contemplated to be studied later Delays in

Ignorance of the
importance of
CR4 maintenance Availability $5,694.87 KPI
[34]. In addition, this research was taken as a cross-sectional work
preventive
maintenance.
design since the information was collected from a single Lack of data Duration of
moment [34]. registration and goods
tools for the
CR5
supervision of dispatches on
the logistics time
area.

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 Rework in the
Lack of training
of workers in the
+148X 29 +89X 30 +104X 31 +354X 32 +26X 33 +51X 34 +37X 35
CR6 maintenance Reworks $2,022.21 KPI
area
maintenance +77X 36 +21X 37 (7)
area

TABLE II Subject to:

INVENTORY POLICY ACCORDING TO CALCULATED EOQ For model 1: Z ≤ 35,000 and all variables X n ≥ 1.
Item ¿
Product Code EOQ
For model 2: Z ≤ 40,000 and all variables X n ≥ Q n.
Inventory turnover SS R
(Q*)
2503030020 18 6 3 1 Finally, formats were created in Microsoft Excel of the
2503030051 4 2 0 0
2503030054 9 4 0 0
files and records of the data necessary for the calculation of
2503030058 4 2 1 0 the KPIs established for the company's logistics and
Oils
2503030116 13 4 3 0 maintenance areas, which had the form shown in Fig. 1.
2503030117 108 15 95 6
2503030119 47 9 27 3
2503030133 9 3 1 0
2503030143 5 2 1 0
2503030152 2 1 0 0
2503010002 47 8 31 10
2503010019 23 6 8 4
2503010183 27 6 12 5
2503010209 31 6 17 6
2503010129 27 6 12 5
2503010233 22 5 8 4
2503010064 14 3 6 2
2503010278 8 1 9 2
2503010210 31 6 18 6
2503010243 9 2 4 2 Fig. 1 Example of tabs and records created for KPI calculation.
2503010149 8 3 1 1
2503010043 10 2 5 2
2503010154 11 3 4 2 In Fig. 3, the design of the processes of the study areas is
Filters 2503010250 6 2 2 1 shown, which were simulated in ProModel for 52 weeks,
2503010105 2 1 0 0
where the main output entity was "Vehicle", whose
2503010273 8 2 3 1
2503010234 14 3 7 3 comparison of the state of the entities in the current model
2503010184 25 5 11 4 against the improvement model is contemplated in Fig. 2. and
2503010207 11 2 6 2
2503010077 10 3 3 1
in Table III.
2503010148 12 4 2 2
2503010173 7 2 2 0
2503010005 10 3 3 1
2503010067 3 1 1 0
2503010294 3 1 1 0
2503010295 3 1 1 0
2503010299 2 1 0 0
a
Each element code belongs to the company's “Sprinter” system.

A Pareto diagram was made to prioritize the economic

losses, and it was obtained that the four exceeded 80%. For the
design of the improvement proposal, it began with the use of
the EOQ model tool applied to all the components of which
inventories were maintained and historical data was recorded
in the evaluation period; in Table II, the results are shown. For
linear programming, two models were obtained, where a
function Z (total value of inventories) was obtained, equation
(7), the average unit costs of each filter and oil were taken as
coefficients, as variables X n to each element that corresponded
to each code according to the order in which they were listed
in Table II. In model 1, Z was maximized; while in model 2, it
was minimized. In addition, a maximum monetary value of the
total inventory was restricted.
Fig. 2 Comparison of entity state times
Objective Function (FO):
Z=117.79X 1 +36X 2 +19X 3 +130X 4 +51X 5 +3X 6 +42X 7
In addition, variables were used to observe the state of the
+27X 8 +23X 9 +127X 10 +39X 11 +104X 12 +20X 13 +33X 14
entities in the different locations and the results were compiled
+73X 15 +36X 16 +24X 17 +82X 18 +40X 19 +321X 20 +177X 21
in Table III.
+90X 22 +100X 23 +170X 24 +33X 25 +17X 26 +172X 27 +41X 28

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 Warehouse

Maintenance area 1

Logistics area Quality Delivery Maintenance area 2

Check area
Departure of trucks
attended

Reception area Maintenance area 3

Fig. 3 Layout of the simulation in ProModel

T ABLE III Sale for transport service $21,383,197.00 $21,383,197.00

COMPARISON OF MODELS IN PROMODEL (-) Cost of operation -$18,851,653.00 -$18,851,653.00
Model with Gross profit $2,531,544.00 $2,531,544.00
ProModel Outputs Current model
improvement (-) Administration expenses -$1,946,073.00 -$1,946,073.00
Trucks to serve 311 311 (-) Selling expenses -$435,473.00 -$435,473.00
Variables Trucks serviced 271 311 operating profit $149,998.00 $149,998.00
Purchases made 271 311 Financial income $748,694.00 $748,694.00
(-) Miscellaneous expense -$1,281,174.00 -$1,281,174.00
%Time in Motion Logic 0.39% 2.84%
(-) Amortization of intangibles $0.00 -$10,740.00
%Time Waiting 33.82% 1.99%
Entity States (-) Interest $0.00 -$1,316.23
%Time in Operation 51.82% 95.17% miscellaneous income $1,557,956.00 $1,651,442.60
%Time Blocked 13.97% 0.00% Income before taxes $1,175,474.00 $1,256,904.37
(-) Income tax -$346,764.83 -$370,786.79
Net profit $828,709.17 $886,117.58
In Table IV, the cost overruns of each of the economic Increase   $57,408.41

losses identified in Table I before and after the improvement

proposal were summarized, and the respective comparison IV. DISCUSSION AND CONCLUSIONS
was made to determine the monetary benefit and reduction
Four economic losses were identified in the company's
percentage that it meant for the company.
maintenance and logistics areas, and it was determined that the
T ABLE IV cost overruns were $108,182.27, associated with six root
OVERRUNS BEFORE AND AFTER THE IMPROVEMENT PROPOSAL causes, and it was possible to establish the appropriate
Economic loss
Cost overrun Cost overrun
% Reduction Benefit
improvement tool.
before upgrade after upgrade

Rush quotes with a

$3,898.59 $1,622.96 58.37% $2,275.63
single provider

unnecessary orders $96,566.60 $12,780.12 86.77% $83,786.48

Delays in
$5,694.87 $292.59 94.86% $5,402.28
maintenance work

Rework in the
$2,022.21 $838.52 58.53% $1,183.69
maintenance area

Total $108,182.27 $15,534.19 85.64% $92,648.08

In Table V, the Income Statement of the last month before

and after the proposal was compared, adding the total benefit
found in Table IV and subtracting the cost of implementing
the proposed improvement tools.
TABLE V
INCOME STATEMENT BEFORE AND AFTER THE IMPROVEMENT PROPOSAL
  September 2021 September 2021 (*)

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 The need to create an inventory policy and the use of the
EOQ model was considered, coinciding with [7], who
conclude that the determination of inventory policies through
EOQ models guides the corresponding managers to better
logistics planning and is achieved. know with greater certainty
the magnitude of the order.
The EOQ model with probabilistic demand allowed
calculating the quantity, duration, safety stock and reorder
point of each purchase of part of the filters and oils that the
company needs, the results are shown in Table II. This new
inventory policy improved purchase planning and
administration of the logistics area, reducing the economic
losses encountered. The positive results agree with the
deterministic EOQ model carried out by [7], where they
concluded that warehouses require tools such as the one used
to minimize the logistics costs of stocks.
Linear programming was used as a verification tool for
the optimal order quantities (Q*) calculated with the EOQ,
which with the restriction required by the company of
$35,000.00 of monetary value of the stock in the warehouse
(model 1), the new Q* of each element varies an average of -
77%, ignoring the supply needs of the parts of the warehouse;
however, when performing a second PL model with a
restriction of $40,000.00, all the Q* of the inventory policy
established in the EOQ model were accepted and shortages or
out-of-stocks were avoided. The monetary value of the
optimal inventory was then $36,432.00.
The finding was contrasted with [39], who stated that
when linear programming was used to manage inventory, it
empowers those in charge to take into account any change in
stock policy, in addition to being helpful for other stock
control decisions. and the flow of these, obtaining the
maximum benefit. In addition, [40], concluded that this tool
allowed having an adaptable work procedure and easy
integration.
In the findings by [13] and [22], a better control and
registration of the study areas in the logistics and maintenance
areas, respectively, was evidenced, verifying, in the same way
that the proposed KPIs allowed better control and registration
in the study areas, which reduced the cost overruns found. In
addition, the lack of historical information in the maintenance
area was observed, in agreement with [41], which for the
quantification of maintenance performance is a frequent and
similar problem in all organizations.
However, it was essential to have historical data to build
the mathematical models of the improvement tools and, for
example, to quantify the relationship between preventive
maintenance and the availability of the machines, in this case,
the trucks [18]. For this reason, the files and records designed
were of great benefit to the company, the data collected was
used for better decision-making by the area managers.
The cost overruns in maintenance and logistics were
determined after the improvement proposal presented, which
were $15,534.19, representing a monetary reduction of
$92,648.08. This was contrasted with [13], who improved the
logistics management of a freight transport company and
obtained a benefit or cost reduction of 28.16% ($62,694.11).
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The implementation of the EOQ, Linear Programming
and KPI tools constituted a cost of $900, $1,000 and $8,840
respectively, that is, the total cost of the implementation of the
improvement proposal for the transport company represented a
total cost of $10,740. In the economic and financial
evaluation, a high value was found for the IRR, being 68%,
which justified the great monetary benefit of the proposal
compared to its low cost. On the other hand, the NPV
indicated a monetary value of $25,295.05 after returning the
investment made. The B/C indicator was 3.29.
Regarding the research question, the results obtained
showed a reduction in economic losses or cost overruns of the
company's logistics and maintenance processes of 85.64%,
which exceeded the 25% established in the hypothesis. This
showed that the joint use of the industrial engineering tools
chosen for the improvement proposal was pertinent and
obtained optimistic results that generate value for the
organization. In addition, [32] and [16] agreed that the benefit
achieved is of great importance, since it not only represented a
monetary saving, but also the modifications made to the
processes increased the efficiency and quality of the service
offered, being the purpose of all company.
As limitations, it should be considered that the economic
order quantity is limited to the delivery time in days, so the
evaluation of the suppliers is recommended. In addition, linear
programming is limited to the cost per unit per part, so it is
recommended to quote with different suppliers and perform
new calculations when these vary. Finally, the KPIs are
limited to a considerable sample time, for which it is
suggested to foresee a data collection in months.
In conclusion, the improvement proposal designed with
the use of linear programming theories, KPI and EOQ
achieved a significant reduction in cost overruns in the
logistics and maintenance areas of Di Bacco Transporti SRL.
When analyzing the economic losses of the company,
significant cost overruns were determined, especially in the
logistics area.
The design of the improvement proposal was carried out
with the use of linear programming, KPI and EOQ, thus an
inventory policy was created according to the restrictions
imposed by the logistics area and also, formats for key
performance indicators, according to the deficiencies found in
the study areas.
Likewise, with the simulation in ProModel of the
proposal, an increase in the maintenance service of the
company's trucks and a significant reduction in the blocking
times of the processes were observed, which represents a
greater availability of the fleet. Consequently, the cost
overruns after the improvement proposal had a significant
monetary reduction.
The improvement proposal was evaluated economically
and financially, it was concluded that it was viable and of
great benefit to the company, demonstrating that the
investment was convenient.
6
 It is worth mentioning that the success in the use of the
tools implies a correct training of the personnel in charge, who
in the future can modify the calculations made for the design
of the improvement proposal, according to the changes that
the company may undergo.
ACKNOWLEDGMENT
We appreciate the information shared and the willingness
of the people interviewed from the company Di Bacco
Transporti SRL Likewise, the constant mentoring and support
of Mg. Michele Simone Dellachiesa in the development of this
research.
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