ford motor company's finished vehicle distribution system
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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
2
Agenda
Introduction 1999 Environment Solution Approach Network Design Implement New Strategy Results to Date Summary
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
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
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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
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The Need for Speed
Other Incentives Damage Flexibility Others?
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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
8
The Price
Inventory at the cross dock Added distance traveled Handling at the cross dock Capital costs of the cross
dock
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
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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.
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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 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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Dealers sourced by
multiple ramps
Old Ramp AllocationSouthern US
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Dealers sourced by
single ramps
New Ramp AllocationSouthern US
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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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The Promise
Capital & Land
Time
Laurel, Montana
Orilla, Washington
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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
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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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Inventory at the Plants Half a rail car full for each
destination
Time
Laurel, Montana
Orilla, Washington
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Inventory 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 Centers Unpredictable
Rail car holds 5 vehicles
OrillaBeniciaMira LomaLaurelDenver
Orilla Benicia Mira L. Laurel Denver
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Workload at the Mixing Centers Balanced: Only load cars you empty
Rail car holds 5 vehicles
OrillaBeniciaMira LomaLaurelDenver
Orilla Benicia Mira L. Laurel DenverOrilla
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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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Reduced plant
destinations
New Rail Lanes
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
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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