pipeline inventory
DESCRIPTION
TRANSCRIPT
Ford Motor Company’sFord Motor Company’sFinished Vehicle Distribution SystemFinished Vehicle Distribution System
April 2001April 2001
Ellen EwingProject DirectorUPS Logistics
Dr. John Vande VateExec. Director EMILISyE Georgia Tech
ConfidentialConfidentialPage Page 22
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AgendaAgenda
Introduction
1999 Environment
Solution Approach
Network Design
Implement New Strategy
Results to Date
Summary
Introduction
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Objectives/MotivationObjectives/Motivation
Importance of Pipeline Inventory
Pipeline Inventory and Network Design
Role of modeling
Information in variables
Stronger formulation
Financial impact
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Competitive NecessityCompetitive Necessity
The new BMW Sales and Production System
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Financial Incentives: Capital Utilization
– In 1996
– Ford produced 3.9 million vehicles in the US– Avg. transit time 15+ days– Avg. vehicle revenue $18,000– Value of pipeline inventory: > $2.8 Billion– One day reduced transit time:
» $190 Million reduction in pipeline inv.» 1,400 fewer railcars
The Need for SpeedThe Need for Speed
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ConfidentialConfidentialPage Page 77
The Need for SpeedThe Need for Speed
Demand for land• 22 Plants• 54 Destination Ramps• ~1,200 Load lanes• ~8,400 vehicles waiting at plants• $166 Million in inventory
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The Need for SpeedThe Need for Speed
Other Incentives Damage
Flexibility
Others?
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Before 1996Before 1996
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Origin RampDeparture
Dealer
Arrival at Dealer
InterchangePoint
This diagram represents most of themovements of Ford vehicles.
Copyright 2000. UPS Logistics Inc., All Rights ReservedLast Updated: 8/30/00
FORDTRANSPORTATION
NETWORK OVERVIEW
Destination Ramp Arrival
VehicleForecast
ProductionBegins
VehicleReleased
Origin RampDeparture
Dealer
Arrival at Dealer
InterchangePoint
This diagram represents most of themovements of Ford vehicles.
Copyright 2000. UPS Logistics Inc., All Rights ReservedLast Updated: 8/30/00
FORDTRANSPORTATION
NETWORK OVERVIEW
Destination Ramp Arrival
VehicleForecast
ProductionBegins
VehicleReleased
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The PriceThe Price
• Inventory at the cross dock• Added distance traveled• Handling at the cross dock• Capital costs of the cross dock
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Mixing CentersMixing Centers
1999 environment
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1999 Vehicle Network Delivery Conditions1999 Vehicle Network Delivery Conditions
Record production levels
Demand shift from cars to trucks
Overburdened rail infrastructure
Deteriorating rail service
Shortage of transport capacity
Mixing centers
15+ day transit time
High inventory cost
Dissatisfied customers
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High 1999 Level StatisticsHigh 1999 Level Statistics
Assembly plants 22
Mixing centers 5
Destination rail ramps 54
Dealer locations 6,000
Production volume 4.4 Mil./Year
Freight expense $1.5 Bil.
Dec. ‘99 avg. transit time 16.8 Days
Pipeline Inventory $4.1 Bil.
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NEVADA
OREGON IDAHO
CALIFORNIA
WASHINGTON
VT. N.H.
R.I.
MASS.
MAINE
MONTANA
WYOMING
UTAH
ARIZONA
NEW MEXICO
COLORADO
NEBRASKA
MINNESOTA
IOWA
KANSAS
TEXAS
OKLAHOMA
MISSOURI
ARKANSAS
TENNESSEE
KENTUCKY
ILLINOIS
WISCONSIN
MICHIGAN
INDIANA
OHIO
GEORGIA
VIRGINIA
FLORIDA
NEW YORK
MD. DEL.
N.J.
HAWAII
W.VA.
MISS.
N. DAKOTA
S. DAKOTA
PENN.
LA.
ALA. S. CAROLINA
N. CAROLINA
CT.
U N I T E D S T A T E S
C A N A D A
M E X I C OGULF OF MEXICO
OCEANATLANTIC
OCEANPACIFIC
Mixing Center Origin Plant Groupings Destination Ramp Planned Ramp Closure
Edison
Norfolk
Atlanta
Kentucky
Ohio
St Louis
CanadaSt Paul
Michigan
Chicago
Kansas City
15% of all vehicles go Haulaway Direct to Dealer within 200-300 Miles of the Assembly Plant
85% of all Vehicles go via Rail to a Hub (Mixing Center or Destination Ramp)
Ford Distribution NetworkFord Distribution Network
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Old Delivery DesignOld Delivery Design
Push Network
Vendor sub systems optimized for individual segments
Little to no visibility
Mixing Centers not used effectively
solutionapproach
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Ford GoalsFord Goals
Speed 1999: Average 15 days transit time
Goal: Maximum of 8 days transit time
Precision 1998/1999: 37% on time within 1 week
Goal: 95% on time within 1 day
Visibility 100 % Internet vehicle tracking from plant release to dealer
delivery
Guide the flow of vehicles
Respond to variations
Inform customers
network design
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Design ProcessDesign Process
Truck vs Rail delivery Allocate Dealers (FIPS)
to Ramps
Route Flows through
Rail Network
Plant
Mixing Center
Origin Ramp
Dest. Ramp
MC Ramp
Ford LocationsFord Locations
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An Allocation Model An Allocation Model
Ramps 1 2 3 4 5X 0.8593 0.0862 0.5641 0.8809 0.4220Y 0.8469 0.2032 0.2642 0.3057 0.6329
Dealers X Y Vol.\Cap. 5 6 7 8 11A 0.8384 0.4486 2 0.40 0.79 0.33 0.15 0.46 B 0.1425 0.4539 5 0.82 0.26 0.46 0.75 0.33 C 0.5174 0.6832 5 0.38 0.65 0.42 0.52 0.11 D 0.3865 0.7005 6 0.50 0.58 0.47 0.63 0.08 E 0.8488 0.6002 1 0.25 0.86 0.44 0.30 0.43 F 0.5067 0.1516 4 0.78 0.42 0.13 0.40 0.49 G 0.4725 0.3077 4 0.66 0.40 0.10 0.41 0.33 H 0.5343 0.6397 3 0.39 0.63 0.38 0.48 0.11 I 0.0035 0.4237 2 0.95 0.24 0.58 0.89 0.47 J 0.4080 0.9980 4 0.48 0.86 0.75 0.84 0.37
Total Distance 0
Ramps 1 2 3 4 5
Dealers Vol.\Cap. 5 6 7 8 11Ramps
Assigned
A 2 - B 5 - C 5 - D 6 - E 1 - F 4 - G 4 - H 3 - I 2 - J 4 - Volume Assigned - - - - -
Assignments
Distances
Ford Finished Vehicle DeliveryAllocating Dealers to Ramps
Single Sourcing
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Single-Sourcing AllocationSingle-Sourcing Allocation
Var Assign{FIPS, RAMPS} binary;
Minimize TotalCost:
sum{fip in FIPS,ramp in RAMPS} Cost[fip,ramp]*Assign[fip,ramp];
s.t. SingleSource{fip in FIPS}:
sum{ramp in RAMPS}Assign[fip,ramp] = 1;
s.t. ObserveCapacity{ramp in RAMPS}:
sum{fip in FIPS} Volume[fip]*Assign[fip,ramp]
<= Capacity[ramp];
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Dealers sourced by
multiple ramps
Old Ramp AllocationSouthern USOld Ramp AllocationSouthern US
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Dealers sourced by
single ramps
New Ramp AllocationSouthern USNew Ramp AllocationSouthern US
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New Allocation of Dealers to RampsMainland USNew Allocation of Dealers to RampsMainland US
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Flows through the Rail NetworkFlows through the Rail Network
Objective is NOT Freight cost!
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The Objective ISThe Objective IS
Speed
Capital
Land
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The PromiseThe Promise
Speed
Unit trains bypass hump yards
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The PromiseThe Promise
Capital & Land
Time
Laurel, Montana
Orilla, Washington
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The PromiseThe Promise
Capital & Land• 22 Plants• 54 Destination Ramps• ~1,200 Load lanes• ~8,400 vehicles waiting at plants• $166 Million in inventory
Each Plant to One Mixing Center• ~22 Load lanes• ~154 vehicles waiting at plants• ~$3 Million in inventory
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The PriceThe Price
• Inventory at the cross dock
• Handling at the cross dock
• Capital costs of the cross dock
• Added distance traveled
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Making the Trade-offsMaking the Trade-offs
Measuring Inventory
In the rail network
At the plants and Cross Docks Load-driven system
Railcars depart when full Relationship between
Network Design and Inventory
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Inventory at the PlantsInventory at the Plants
Half a rail car full for each destination
Time
Laurel, Montana
Orilla, Washington
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Inventory at the Mixing CentersInventory at the Mixing Centers
Half a rail car full for each destination
Time
Laurel, Montana
Orilla, Washington
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Workload at the Mixing CentersWorkload at the Mixing Centers
UnpredictableRail car holds 5 vehicles
OrillaBeniciaMira LomaLaurelDenver
Orilla Benicia Mira L. Laurel Denver
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Workload at the Mixing CentersWorkload at the Mixing Centers
Balanced: Only load cars you emptyRail car holds 5 vehicles
OrillaBeniciaMira LomaLaurelDenver
Orilla Benicia Mira L. Laurel DenverOrilla
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Effect on InventoryEffect on Inventory
Inventory at Mixing Center slowly grows
to just over (ramps -1)(capacity -1) and
remains there Roughly twice the inventory of before Still depends on the number of ramps the
cross dock serves
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Consolidation for SpeedConsolidation for Speed
Unit Trains of 15-20 rail cars don’t stop at
mixing yards Trade moving inventory for stationary
inventory
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ModelModel
Paths Route from Plant to Ramp Mode used on each edge
Demand[ramp, plant] Combined demand at ramp for all products from the plant
Variables: PathFlow[path]:
Volume from the plant to the ramp on the path
UseLane[fromloc, toloc, mode] binary Did we use the mode between two locations
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ModelModel
Objective Minimize the number of vehicles in the pipeline
Moving Component (Transit times) Waiting Component (Mode Size)
Minimize PipelineInventory: sum{path in Paths} (Total Transit Time)*PathFlow[path]; sum{(f,t,m)} (Size[m]/2)*UseLane[f,t,m]
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ModelModel
Satisfy Demand The sum of flows on all paths between a plant and a
ramp must meet demand s.t. SatisfyDemand[p in PLANTS, r in RAMPS}:
sum{path in PATHS: Plant[path]=p and Ramp[path] = r} PathFlow[path] >= Demand[p,r];
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ModelModel
Define UseLane For each pair of locations and mode between them write a
constraint for each plant and ramp s.t. DefineUseLane[p in PLANTS, r in RAMPS, (f,t,m) in EDGES}:
sum{path in PATHS: Plant[path]=p and Ramp[path] = r and (f,t,m) in PATHEDGES[path]} PathFlow[path] <= Demand[p,r]*UseLane[f,t,m];
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ModelModel
Large Model Lots of Variables: Many Paths Lots of Constraints: DefineUseLane
The LP relaxation is nearly always integralUse Column Generation
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Reduced plant
destinations
New Rail LanesNew Rail Lanes
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NEVADA
OREGON IDAHO
CALIFORNIA
WASHINGTON
VT. N.H.
R.I.
MASS.
MAINE
MONTANA
WYOMING
UTAH
ARIZONA
NEW MEXICO
COLORADO
NEBRASKA
MINNESOTA
IOWA
KANSAS
TEXAS
OKLAHOMA
MISSOURI
ARKANSAS
TENNESSEE
KENTUCKY
ILLINOIS
WISCONSIN
MICHIGAN
INDIANA
OHIO
GEORGIA
VIRGINIA
FLORIDA
NEW YORK
MD. DEL.
N.J.
HAWAII
W.VA.
MISS.
N. DAKOTA
S. DAKOTA
PENN.
LA.
ALA. S. CAROLINA
N. CAROLINA
CT.
U N I T E D S T A T E S
C A N A D A
M E X I C OGULF OF MEXICO
OCEANATLANTIC
OCEANPACIFIC
Mixing Centers Destination Ramps
Union Pacific CSXT FEC
BNSF Canadian Pacific Car Haul to Ramp
Norfolk Southern Canadian National
Edison
Norfolk
Atlanta
Kentucky
Ohio
St Louis
Canada
St Paul
Michigan
Chicago
Kansas City
Final Outbound Rail Network with CarriersFinal Outbound Rail Network with Carriers
resultsto date
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ResultsResults
Cut vehicle transit time by 26% or 4 days
$1 billion savings in vehicle inventory
$125 million savings in inventory carrying costs
Avoid bottlenecks
Reduce assets in supply chain
Improved inventory turns at dealer
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Benefits Benefits
Ford
Dealers
Rail Carriers Auto Haulers
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Benefits - FordBenefits - Ford
On-time delivery
Competitive edge
Cost control
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Benefits - DealersBenefits - Dealers
Reduced inventories Increased customer satisfaction
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Benefits - Rail CarriersBenefits - Rail Carriers
Improved equipment utilization (reduced capital expenditures) Visibility and planning capabilities Synergies with existing UPS traffic Increased cooperation
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Benefits - Auto HaulersBenefits - Auto Haulers
Expanded dealer delivery hours Visibility and planning capability Improved asset utilization Increased cooperation
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Other OpportunitiesOther Opportunities
Where to go from here?