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Ford Motor Company’s Finished Vehicle Distribution System April 2001 PowerPoint PPT Presentation


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Ford Motor Company’s Finished Vehicle Distribution System April 2001. Ellen Ewing Project Director UPS Logistics. Dr. John Vande Vate Exec. Director EMIL ISyE Georgia Tech. Agenda. Introduction 1999 Environment Solution Approach Network Design Implement New Strategy Results to Date

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Ford Motor Company’s Finished Vehicle Distribution System April 2001

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Ford Motor Company’s

Finished Vehicle Distribution System

April 2001

Ellen Ewing

Project Director

UPS Logistics

Dr. John Vande Vate

Exec. Director EMIL

ISyE Georgia Tech


Agenda l.jpg

Agenda

  • Introduction

  • 1999 Environment

  • Solution Approach

  • Network Design

  • Implement New Strategy

  • Results to Date

  • Summary


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Objectives/Motivation

  • Novel application of cross-docking: Rail-to-Rail

  • Cross-docking for Speed

  • Role of modeling

  • Load-driven System

  • Modeling Inventory in Network Design


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The Need for Speed

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


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The 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 Speed

  • Other Incentives

    • Damage

    • Flexibility

    • Others?


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The Price

  • Inventory at the cross dock

  • Added distance traveled

  • Handling at the cross dock

  • Capital costs of the cross dock


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1999 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 Statistics

  • Assembly plants22

  • Mixing centers 5

  • Destination rail ramps54

  • Dealer locations6,000

  • Production volume4.4 Mil./Year

  • Freight expense$1.5 Bil.

  • Dec. ‘99 avg. transit time16.8 Days

  • Pipeline Inventory$4.1 Bil.


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St Paul

Canada

Michigan

Edison

Chicago

85% of all Vehicles go via

Ohio

Rail to a Hub (Mixing Center

or Destination Ramp)

St Louis

Norfolk

Kentucky

Kansas City

15% of all vehicles go

Haulaway Direct to

Atlanta

Dealer within 200-300

Miles of the Assembly

Plant

Mixing Center

Origin Plant Groupings

Destination Ramp

Planned Ramp Closure

Ford Distribution Network


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Old Delivery Design

  • Push Network

  • Vendor sub systems optimized for individual segments

  • Little to no visibility

  • Mixing Centers not used effectively


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Ford 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


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Design Process

  • Truck vs Rail delivery

  • Allocate Dealers (FIPS)

    to Ramps

  • Route Flows through

    Rail Network


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Single-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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Old Ramp AllocationSouthern US

Dealers sourced bymultiple ramps


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New Ramp AllocationSouthern US

Dealers sourced by single ramps


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New Allocation of Dealers to RampsMainland US


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Flows through the Rail Network

  • Objective is NOT Freight cost!


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The Objective IS

  • Speed

  • Capital

  • Land


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The Promise

  • Speed

  • Unit trains bypass hump yards


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Laurel, Montana

Orilla, Washington

The Promise

  • Capital & Land

Time


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The 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 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-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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Laurel, Montana

Orilla, Washington

Inventory at the Plants

  • Half a rail car full for each destination

Time


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Laurel, Montana

Orilla, Washington

Inventory at the Mixing Centers

  • Half a rail car full for each destination

Time


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Mira L.

Orilla

Laurel

Benicia

Denver

Workload at the Mixing Centers

Rail car holds 5 vehicles

  • Unpredictable

Orilla

Benicia

Mira Loma

Laurel

Denver


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Mira L.

Orilla

Laurel

Benicia

Denver

Workload at the Mixing Centers

Rail car holds 5 vehicles

  • Balanced: Only load cars you empty

Orilla

Benicia

Mira Loma

Laurel

Denver

Orilla


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Effect 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 Speed

  • Unit Trains of 15-20 rail cars don’t stop at

  • mixing yards

  • Trade moving inventory for stationary

  • inventory


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Model

  • 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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Model

  • 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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Model

  • 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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Model

  • 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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Model

  • Large Model

    • Lots of Variables: Many Paths

    • Lots of Constraints: DefineUseLane

  • The LP relaxation is nearly always integral


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New Rail Lanes

Reduced plant destinations


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Final Outbound Rail Network with Carriers

St Paul

Canada

Edison

Michigan

Chicago

Ohio

St Louis

Norfolk

Kentucky

Kansas City

Atlanta

Mixing Centers

Destination Ramps

Union Pacific

CSXT

FEC

BNSF

Canadian Pacific

Car Haul to Ramp

Norfolk Southern

Canadian National


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Results

  • 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

  • Ford

  • Dealers

  • Rail Carriers

  • Auto Haulers


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Benefits - Ford

  • On-time delivery

  • Competitive edge

  • Cost control


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Benefits - Dealers

  • Reduced inventories

  • Increased customer satisfaction


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Benefits - 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 Haulers

  • Expanded dealer delivery hours

  • Visibility and planning capability

  • Improved asset utilization

  • Increased cooperation


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