ford motor company's finished vehicle distribution system

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Ford Motor Company’s Ford Motor Company’s Finished Vehicle Distribution Finished Vehicle Distribution System System April 2001 April 2001 Ellen Ewing Project Director UPS Logistics Dr. John Vande Vate Exec. Director EMIL ISyE Georgia Tech

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Page 1: Ford Motor Company's Finished Vehicle Distribution System

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

Page 2: Ford Motor Company's Finished Vehicle Distribution System

2

Agenda

Introduction 1999 Environment Solution Approach Network Design Implement New Strategy Results to Date Summary

Page 3: Ford Motor Company's Finished Vehicle Distribution System

3

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

Page 4: Ford Motor Company's Finished Vehicle Distribution System

4

Financial Incentives: Capital UtilizationIn 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 Speed

Page 5: Ford Motor Company's Finished Vehicle Distribution System

5

The Need for SpeedDemand for land 22 Plants 54 Destination Ramps ~1,200 Load lanes ~8,400 vehicles waiting

at plants $166 Million in inventory

Page 6: Ford Motor Company's Finished Vehicle Distribution System

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The Need for Speed

Other Incentives Damage Flexibility Others?

Page 7: Ford Motor Company's Finished Vehicle Distribution System

7

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

Page 8: Ford Motor Company's Finished Vehicle Distribution System

8

The Price

Inventory at the cross dock Added distance traveled Handling at the cross dock Capital costs of the cross

dock

Page 9: Ford Motor Company's Finished Vehicle Distribution System

9

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

Page 10: Ford Motor Company's Finished Vehicle Distribution System

10

High 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.

Page 11: Ford Motor Company's Finished Vehicle Distribution System

11

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 Network

Page 12: Ford Motor Company's Finished Vehicle Distribution System

12

Old Delivery Design Push Network Vendor sub systems optimized for individual segments

Little to no visibility Mixing Centers not used effectively

Page 13: Ford Motor Company's Finished Vehicle Distribution System

13

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

Page 14: Ford Motor Company's Finished Vehicle Distribution System

14

Design Process

Truck vs Rail delivery Allocate Dealers (FIPS) to Ramps

Route Flows through Rail Network

Page 15: Ford Motor Company's Finished Vehicle Distribution System

15

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];

Page 16: Ford Motor Company's Finished Vehicle Distribution System

16

Dealers sourced by

multiple ramps

Old Ramp AllocationSouthern US

Page 17: Ford Motor Company's Finished Vehicle Distribution System

17

Dealers sourced by

single ramps

New Ramp AllocationSouthern US

Page 18: Ford Motor Company's Finished Vehicle Distribution System

18

New Allocation of Dealers to RampsMainland US

Page 19: Ford Motor Company's Finished Vehicle Distribution System

19

Flows through the Rail Network

Objective is NOT Freight cost!

Page 20: Ford Motor Company's Finished Vehicle Distribution System

20

The Objective IS

Speed Capital Land

Page 21: Ford Motor Company's Finished Vehicle Distribution System

21

The Promise

Speed

Unit trains bypass hump yards

Page 22: Ford Motor Company's Finished Vehicle Distribution System

22

The Promise

Capital & Land

Time

Laurel, Montana

Orilla, Washington

Page 23: Ford Motor Company's Finished Vehicle Distribution System

23

The PromiseCapital & Land 22 Plants 54 Destination Ramps ~1,200 Load lanes ~8,400 vehicles waiting at plants $166 Million in inventoryEach Plant to One Mixing Center ~22 Load lanes ~154 vehicles waiting at plants ~$3 Million in inventory

Page 24: Ford Motor Company's Finished Vehicle Distribution System

24

The Price

Inventory at the cross dock Handling at the cross dock Capital costs of the cross dock

Added distance traveled

Page 25: Ford Motor Company's Finished Vehicle Distribution System

25

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

Page 26: Ford Motor Company's Finished Vehicle Distribution System

26

Inventory at the Plants Half a rail car full for each

destination

Time

Laurel, Montana

Orilla, Washington

Page 27: Ford Motor Company's Finished Vehicle Distribution System

27

Inventory at the Mixing Centers Half a rail car full for each

destination

Time

Laurel, Montana

Orilla, Washington

Page 28: Ford Motor Company's Finished Vehicle Distribution System

28

Workload at the Mixing Centers Unpredictable

Rail car holds 5 vehicles

OrillaBeniciaMira LomaLaurelDenver

Orilla Benicia Mira L. Laurel Denver

Page 29: Ford Motor Company's Finished Vehicle Distribution System

29

Workload at the Mixing Centers Balanced: Only load cars you empty

Rail car holds 5 vehicles

OrillaBeniciaMira LomaLaurelDenver

Orilla Benicia Mira L. Laurel DenverOrilla

Page 30: Ford Motor Company's Finished Vehicle Distribution System

30

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

Page 31: Ford Motor Company's Finished Vehicle Distribution System

31

Consolidation for Speed

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

mixing yards Trade moving inventory for stationary inventory

Page 32: Ford Motor Company's Finished Vehicle Distribution System

32

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

Page 33: Ford Motor Company's Finished Vehicle Distribution System

33

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]

Page 34: Ford Motor Company's Finished Vehicle Distribution System

34

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];

Page 35: Ford Motor Company's Finished Vehicle Distribution System

35

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];

Page 36: Ford Motor Company's Finished Vehicle Distribution System

36

Model

Large Model Lots of Variables: Many Paths Lots of Constraints: DefineUseLane

The LP relaxation is nearly always integral

Page 37: Ford Motor Company's Finished Vehicle Distribution System

37

Reduced plant

destinations

New Rail Lanes

Page 38: Ford Motor Company's Finished Vehicle Distribution System

38

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 Carriers

Page 39: Ford Motor Company's Finished Vehicle Distribution System

39

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

Page 40: Ford Motor Company's Finished Vehicle Distribution System

40

Benefits

Ford Dealers Rail Carriers Auto Haulers

Page 41: Ford Motor Company's Finished Vehicle Distribution System

41

Benefits - Ford

On-time delivery

Competitive edge

Cost control

Page 42: Ford Motor Company's Finished Vehicle Distribution System

42

Benefits - Dealers

Reduced inventories Increased customer satisfaction

Page 43: Ford Motor Company's Finished Vehicle Distribution System

43

Benefits - Rail Carriers

Improved equipment utilization (reduced capital expenditures) Visibility and planning capabilities Synergies with existing UPS traffic Increased cooperation

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44

Benefits - Auto Haulers

Expanded dealer delivery hours Visibility and planning capability Improved asset utilization Increased cooperation