General Motors Factory

Relocation Program

General Motors Factory

Relocation Program

By Yudi JinJP Park

By Yudi JinJP Park

Company OverviewCompany Overview

• Founded in 1908• World’s 2nd Largest• Company presence in 140 countries

• Employs 244,500 worldwide

• Major Brands– Buick, Cadillack, Chevrolet, GMC, HUMMER, Saab

• Founded in 1908• World’s 2nd Largest• Company presence in 140 countries

• Employs 244,500 worldwide

• Major Brands– Buick, Cadillack, Chevrolet, GMC, HUMMER, Saab

Problem?Problem?

• Stock Price– April 28, 2000: 93.62– May 1, 2009: 1.81

• Financial Statements– Net Loss

• 2008: 30,860,000• 2007: 38,732,000

• Decreasing Demand– 2008: 23% decrease in demand from 2007

• Hypothesis: Gross Inefficiencies

• Stock Price– April 28, 2000: 93.62– May 1, 2009: 1.81

• Financial Statements– Net Loss

• 2008: 30,860,000• 2007: 38,732,000

• Decreasing Demand– 2008: 23% decrease in demand from 2007

• Hypothesis: Gross Inefficiencies

Scope of ProjectScope of Project

• GM North America– United States

•Top 10 Cities (Demand)

• Factory Location– Service– Wages– Various Costs

•Transportation

• GM North America– United States

•Top 10 Cities (Demand)

• Factory Location– Service– Wages– Various Costs

•Transportation

GM Operations in the US

GM Operations in the US

• Total Employees: 97,067• Factories: 86• Cars and Trucks Produced

– Q1 2009: 1,652,909– 2008: 3,097,924– 2007: 4,489,818

• Total Employees: 97,067• Factories: 86• Cars and Trucks Produced

– Q1 2009: 1,652,909– 2008: 3,097,924– 2007: 4,489,818

Current GM Factory Locations

Current GM Factory Locations

Wage TablesWage Tables

10 Cities with Lowest Production Wages (percent

National)

10 Cities with Lowest Production Wages (percent

National)• Brownsville-Harlingen, TX (76)• Johnstown, PA (84)• Oklahoma City, OK, (85)• Orlando-Kissimmee, FL, (85)• Birmingham-Hoover, AL, (88)• Knoxville, TN, (88)• Lincoln, NE, (89)• Amarillo, TX, (91)• Dallas-Fort Worth, TX, (91)• Visalia-Porterville, CA, (92)

• Brownsville-Harlingen, TX (76)• Johnstown, PA (84)• Oklahoma City, OK, (85)• Orlando-Kissimmee, FL, (85)• Birmingham-Hoover, AL, (88)• Knoxville, TN, (88)• Lincoln, NE, (89)• Amarillo, TX, (91)• Dallas-Fort Worth, TX, (91)• Visalia-Porterville, CA, (92)

Top 10 areas for GM sales

Top 10 areas for GM sales

• Total GM sales Rank Market (add 000)

• 1. New York-Newark-Edison, NY-NJ-PA $22,756,490 • 2. Los Angeles-Long Beach- Santa Ana, CA $22,331,511 • 3. Dallas-Fort Worth- Arlington, TX $13,541,992 • 4. Chicago-Naperville- Joliet, IL-IN-WI $12,594,549 • 5. Houston-Baytown-Sugar Land, TX $12,575,414 • 6. Detroit-Warren- Livonia, MI $10,261,680 • 7. Washington-Arlington- Alexandria, DC-VA- MD-WV $10,068,928 • 8. Riverside-San Bernardino-Ontario, CA $9,007,470 • 9. Seattle-Tacoma- Bellevue, WA $8,870,930 • 10. Atlanta-Sandy Springs- Marietta, GA $8,684,820

• Total GM sales Rank Market (add 000)

• 1. New York-Newark-Edison, NY-NJ-PA $22,756,490 • 2. Los Angeles-Long Beach- Santa Ana, CA $22,331,511 • 3. Dallas-Fort Worth- Arlington, TX $13,541,992 • 4. Chicago-Naperville- Joliet, IL-IN-WI $12,594,549 • 5. Houston-Baytown-Sugar Land, TX $12,575,414 • 6. Detroit-Warren- Livonia, MI $10,261,680 • 7. Washington-Arlington- Alexandria, DC-VA- MD-WV $10,068,928 • 8. Riverside-San Bernardino-Ontario, CA $9,007,470 • 9. Seattle-Tacoma- Bellevue, WA $8,870,930 • 10. Atlanta-Sandy Springs- Marietta, GA $8,684,820

Project LocationsProject Locations

ComparisonComparison

FormulationFormulation• All demand in top 10 cities must be met

1. 534,575.4

2. 524,592.1

3. 318,116.5

4. 295,860

5. 295,410.5

6. 241,058.3

7. 236,530.4

8. 211,595.5

9. 208,388.1

10. 204,016.1

• Each factory on average employs 1115 employees costing $32,925,504 in wages (national average) per year

• Each factory can produce 49,518 vehicles per year • Need to place roughly 63 factories in order to satisfy demand• Average cost of transportation is $.857 per vehicle per mile

• All demand in top 10 cities must be met1. 534,575.4

2. 524,592.1

3. 318,116.5

4. 295,860

5. 295,410.5

6. 241,058.3

7. 236,530.4

8. 211,595.5

9. 208,388.1

10. 204,016.1

• Each factory on average employs 1115 employees costing $32,925,504 in wages (national average) per year

• Each factory can produce 49,518 vehicles per year • Need to place roughly 63 factories in order to satisfy demand• Average cost of transportation is $.857 per vehicle per mile

Knoxville Lincoln Amarillo Dallas Visalia Brownsville Johnstown Oklahoma City Orlando Birmingham

NY 708 1185 1709 1552 2885 1983 320 1446 1082 967

LA 2183 1496 1071 1438 188 1629 2505 1332 2509 2027

Dallas 843 636 363 0 1527 544 1316 207 1137 636

Chicago 541 522 1053 969 2110 1511 523 790 1156 662

Houston 922 875 605 239 1733 354 1456 447 964 666

Detriot 511 788 1306 1194 2375 1737 345 1043 1161 724

Washington 487 1206 1602 1331 2765 1762 193 1343 846 745

Riverside 2151 1465 1040 1388 246 1579 2474 1301 2460 1996

Seattle 2625 2678 2767 2204 968 2554 2586 1997 3133 2639

Atlanta 213 1000 1105 781 2269 1145 726 846 441 147

Distances between top 10 cities (mi.)

LP SolutionLP Solution

• Minimize factory location w/ respect to cost• Solution using Ampl:• 7 factories in Dallas shipping to Dallas• 11 factories in Visalia shipping to LA• 5 factories in Visalia shipping to Riverside• 5 factories in Visalia shipping to Seattle• 6 factories in Brownsville shipping to Houston• 11 factories in Johnstown shipping to NY• 6 factories in Johnstown shipping to Chicago• 5 factories in Johnstown shipping to Detroit• 5 factories in Johnstown shipping to Washington DC• 5 factories in Birmingham shipping to Atlanta

• Objective Value - $2,750,998,404• 5-25% cost decrease from current GM locations

• Minimize factory location w/ respect to cost• Solution using Ampl:• 7 factories in Dallas shipping to Dallas• 11 factories in Visalia shipping to LA• 5 factories in Visalia shipping to Riverside• 5 factories in Visalia shipping to Seattle• 6 factories in Brownsville shipping to Houston• 11 factories in Johnstown shipping to NY• 6 factories in Johnstown shipping to Chicago• 5 factories in Johnstown shipping to Detroit• 5 factories in Johnstown shipping to Washington DC• 5 factories in Birmingham shipping to Atlanta

• Objective Value - $2,750,998,404• 5-25% cost decrease from current GM locations

Local SearchLocal Search• With the unbounded problem there are an enormous number for

potential factory locations, solving using an LP solver would not be feasible, another solution would be to use Local Search. After initially placing all factories, it is easy to shift one factory and recalculate costs

• Ex.

• With the unbounded problem there are an enormous number for potential factory locations, solving using an LP solver would not be feasible, another solution would be to use Local Search. After initially placing all factories, it is easy to shift one factory and recalculate costs

• Ex. Starting Point: Total Cost: 3,391,157,612

Knoxville Lincoln Amarillo Dallas Visalia Brownsville Johnstown Oklahoma City Orlando Birmingham

NY 56049.7 346626 71322.1 60577.6 LA 85512.5 3733.7 346626 88719.9 Dallas 318116.5 Chicago 295860 Houston 295410.5 Detriot 241058.3 Washington 236530.4 Riverside 211595.5 Seattle 208388.1 Atlanta 204016.1 # Factories 6 6 6 7 7 6 7 6 6 6

First Iteration: Shift 1 Factory from Orlando to Johnstown: Total Cost 3,358,491,420

Knoxville Lincoln Amarillo Dallas Visalia Brownsville Johnstown Oklahoma City Orlando Birmingham

NY 56049.7 396144 21804.1 60577.6 LA 85512.5 3733.7 346626 88719.9 Dallas 318116.5 Chicago 295860 Houston 295410.5 Detriot 241058.3 Washington 236530.4 Riverside 211595.5 Seattle 208388.1 Atlanta 204016.1 # Factories 6 6 6 7 7 6 8 6 5 6

Second Iteration: Shift 1 Factory from Oklahoma City to Visalia: Total Cost : 3,312,248,362

Knoxville Lincoln Amarillo Dallas Visalia Brownsville Johnstown Oklahoma City Orlando Birmingham

NY 56049.7 396144 21804.1 60577.6 LA 85512.5 3733.7 396144 39201.9 Dallas 318116.5 Chicago 295860 Houston 295410.5 Detriot 241058.3 Washington 236530.4 Riverside 211595.5 Seattle 208388.1 Atlanta 204016.1 # Factories 6 6 6 7 8 6 8 5 5 6

Third Iteration: Shift 1 Factory from Amarillo to Johnstown: Total Cost: 3,295,912,334Knoxville Lincoln Amarillo Dallas Visalia Brownsville Johnstown Oklahoma City Orlando Birmingham

NY 56049.7 445662 32863.7LA 35994.5 53251.7 396144 39201.9Dallas 318116.5Chicago 295860Houston 295410.5Detriot 241058.3Washington 236530.4Riverside 211595.5Seattle 208388.1Atlanta 204016.1# Factories 6 6 5 7 8 6 9 5 5 6

ResourcesResources

• GM ANNUAL FINANCIAL REPORT• US Department of Labor• http://www.supplyexcellence.com/blog/2006/08/14/gm-drives-

toward-cost-goals-with-new-supply-techniques• Racher Press Research • http://jalopnik.com/340225/gm-sales-decrease-in-2007-but-

people-love-the-aveo• http://www.domesticsale.com/autoclassified/prices.html

• GM ANNUAL FINANCIAL REPORT• US Department of Labor• http://www.supplyexcellence.com/blog/2006/08/14/gm-drives-

toward-cost-goals-with-new-supply-techniques• Racher Press Research • http://jalopnik.com/340225/gm-sales-decrease-in-2007-but-

people-love-the-aveo• http://www.domesticsale.com/autoclassified/prices.html