global logistics, causes of variation. background headquartered in purchase, ny world’s largest...
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GLOBAL LOGISTICS, CAUSES OF VARIATION
Background
Headquartered in Purchase, NY
World’s largest producer of paper and forest products
Forward integrated into distribution (XPEDX)
Backward integrated into forestry mgt.
Products
papers, packaging products, building materials, pulp, chemicals
International Shipping
Production facilities located worldwidebulk is in eastern U.S.
Small margin on paper prevents shipping large quantities internationally
Pulp makes up largest portion of international shipments
higher margin allows for more international sales
Example: US to Australia
IP Mills (Southeast US)
Rail 4-10 days(depends on origin)
Freight Forwarder(New Orleans)
Ocean Freight30-60 days
Sydney, Melbourne, Brisbane
Closer Look at Ocean Freight
Statistics
Mean 38Standard Deviation 11
Range 17Minimum 31Maximum 48# Carriers 13
New Orleans to Sydney
Statistics
Mean 43Standard Deviation 7
Range 27Minimum 26Maximum 53# Carriers 12
New Orleans to Melbourne
Statistics
Mean 45Standard Deviation 9
Range 28Minimum 31Maximum 59# Carriers 13
New Orleans to Brisbane
Statistics calculated from quoted transit times for IP’s contracted carriers
Why the large discrepancy between carriers ?
Carrier Differences
Primary Factor is Resource Allocation
If US to Australia is a primary lanevessels make the trip non stop
shipments aren’t transferred at an intermediary port
IF US to Australia is a secondary lanevessels will stop in an intermediary port (most likely Asia)
Shipments are transferred to different vessel before reach final stop
Transit Time Variation by Carrier
Much less variable than by secondary carrierTypically more expensivePrimary factors
missing departure due to fumigation requirementsmechanical failureHuman error
Usually no more than 7 days off
Much less variable than by secondary carrierTypically more expensivePrimary factors
missing departure due to fumigation requirementsmechanical failureHuman error
Usually no more than 7 days off
Primary Carriers
More variableBut usually less expensivePrimary factors
Missing connections in intermediary portmissing departure due to fumigation requirementsmechanical failureHuman error
Anywhere from 7 -14 days off
More variableBut usually less expensivePrimary factors
Missing connections in intermediary portmissing departure due to fumigation requirementsmechanical failureHuman error
Anywhere from 7 -14 days off
Secondary Carriers
Profile
• Headquartered in Middletown, Ohio.• A leader in the production of coated and cold-rolled
carbon and stainless steel products.• Customers include automobile, appliance,
construction, and distribution and service centers.
Operations
Operation facilities in
Ashland, Kentucky
Middletown, Ohio
Rockport, Indiana
Strategic partner in Mexico
Hylsamex in Monterrey, Mexico
Transportation Modes
AKSteelPlants
Border
Hylsamex
Rail 3-4 days Rail 1-2 days
Barge 40-50 days Truck 1 day
Truck 2-4 days
Brownsville, TX
1-3 days
Affecting Factors
the time spent in Custom’s to process the paperwork
the availability of capacity, such as containers, trucks, and so on
traffic
weather
Smurfit-Stone
New Company (1998) merger of Jefferson Smurfit Corporation and Stone Container Corporation
Leading force in the paperboard and paper packaging industry
Operates approximately 300 facilities worldwide
Containerboard Mill Division
Operation:
12 kraft linerboard mills, 11 medium mills
Production:
Unbleached kraft linerboard and Medium
Products:
Commodity and specialty paperboards for conversion into corrugated containers, folding cartons, and related products.
Corrugated Container Operations
Operation:
More than 150 corrugated container plants in North America and 33 plants in Europe, Asia, Australia and South America
Production:
Nation’s largest supplier of corrugated containers, made linerboard and corrugating medium (supply by CMD)
Products:
High-quality corrugated containers
Operation between CMD and CCO-Mexico
Rail: From U.S. Mills to Mexican Border
Truck: From Mexican Border to plants
Project Scope:
Rail Operations
Causes of Variability in the Supply Chain
Mills:Florida
Louisiana
Border:Weslaco,
Tex
Plants:Monterrey,
Mexico
From Florida to Mex. Border
Data 17Avg 13.65StDev 3.55Max 19.00Min 7.00
Rail Shipments
Normal Dist.
From Louisiana Mex. Border
Data 17Avg 9.76StDev 2.11Max 13.00Min 7.00
Rail Shipments
No Normal Dist.
Causes Of Variation
Rail:Not Direct RouteHigh Demand in Pick Season
Customs:Shift to TruckPaperworkTraffic Congestion
Truck:Availability
Supply Chain
Fibras Quimicas• Mexican company, Located in Monterrey, Mexico.
• Fibras Quimicas' parent company is Akra.
• Akra's holding company is Alpek.
• Alpek is the petrochemical division of Group Alfa.
• Group Alfa is one of the biggest industrial groups in Mexico.
• Group Alfa is an association of Mexican companies focused on the diverse and quite varying industry sectors including the steel, food, petrochemicals, synthetic fibers, aluminum auto parts, mattresses, carpets and telecommunications.
Fibras QuimicasFibras Quimicas
ProductsPoliester Products :
• Textured Yarns
• Flat Yarns
• Pre-oriented Yarns ( POY )
• Wrapped Yarns
• Twisted Yarns
Final Uses :
• Apparel
• Home Textiles
• Out wear
• Linings
• Narrows
• Upholstery
• Mattress and thicking
• Automotive fabrics
• Comfort fabrics
By Ship
Europe 28 to 30 Days
Africa 30 to 32 Days ( Morocco )
Middle East 38 to 40 Days ( Syria )
By Truck
Central America 10 to 15 Days
By Ship
South America 20 to 25 Days
Colombia 12 to 15 Days
By Truck
Canada 8 to 9 Days
U.S. Eastern Coast 5 to 6 Days
This is where we got raw data, and where we will do a more extensive analysis.
Operations of Fibras Quimicas
Shipping to The United States and Canada
• We were able to gather raw data on 5 U.S. customers and 2 Canadian customers.
• This customers account for 67% of Fibras Quimicas sales in the North America region.
• Team Drivers = the use of two drivers for the same truck ½ the lead time.
• We took out this effect, because it disrupted our data, only use less than 5% of the time ! Higher cost !
Customer Location
# of Shipments up to March 2000
Buffer Inventory
Average Lead time in Days
Std Deviation
W/O Team drivers Avg Lead time
W/O Team drivers Std Deviation
Blumenthal Mills Inc. Sumter, SC 58 3 weeks 5.3 0.34 5.3 0.34Burke Mills, Inc. Valdese, NC 19 5.1 * 0.74 * 5.3 0.21Culp Weaving Inc. Monroe, NC 18 2 weeks 5.9 0.18 5.9 0.18Dan River Inc. Danville, VA 17 6 0.22 6 0.22Guilford Mills Inc. Monroe, NC 47 2 weeks 5 * 0.64 * 5.2 0.19Huntindong Mills Hawksbury, ON 21 8.8 0.13 8.8 0.13Rayonese Textile Co. St. Jerome, PQ 39 7.8 0.12 7.8 0.12
219
* with the use of Team Drivers
Total
Crossing the Mexico – U.S. Border
• One of the greater sources for variability is crossing the border.
• Although for Canadian shipments, this doesn't affect that much!
• Crosses at Laredo Texas !
The trucks, willhave to wait their turn
to cross, the traffic can go up to 1 mile..
If Inspection needed (determined randomly by
U.S. Customs)It can delay the shipment
for one whole day.
The Cargo is sealed as Inbound, and passeswithout inspection.
The Truck is sent to a big facility, where it waits for an American
driver, Mexican drivers stillare not allowed to cross the border.
Final Destination
U.S.
Final Destination
Canada
+ Var.
Guilford Mills• Located in Monroe, NC.
• Produces Automotive fabrics FORD FOCUS.
• 47 Shipments
• Mean 5 Days
• Std Dev. 0.64
• Team drivers, we took out 4 points, mean went to 5.2 and std dev. to 0.19
• Inventory buffer on site 2 weeks.
• Pass the Normality Test.
• AKRA uses the same carrier.
• Lower lead time than Culp, that is on the same city !
• Service important to this customer.
Rayonese Textile
• Located in St. Jerome, PQ.
• Produces Mattress & thicking and upholstery.
• 39 Shipments
• Mean 7.8 Days
• Std Dev. 0.12
• Canadian Customer
• No Team drivers !
• Fail the Normality Test.
• AKRA uses different carriers depending on availability and price!
• The distribution is shifted to the right.
Other Customers• Located in Danville, VA.
• Produces Bed in a Bag.
• 17 Shipments
• Mean 6 Days
• Std Dev. 0.22
• No Team drivers !
• Pass the Normality Test.
• Located in Valdese, NC.
• Dye yarns and resell them.
• 19 Shipments
• Mean 5.1 Days
• Std Dev. 0.74
• Team drivers ! took out 2 points mean went to 5.3 days and std dev. to 0.21
• Pass the Normality Test.
• Located in Monroe, NC.
• Produces Mattress & thicking and upholstery.
• 18 Shipments
• Mean 5.9 Days
• Std Dev. 0.18
• No Team drivers !
• Inventory buffer on site 2 weeks.
• Pass the Normality Test.
• Located in Hawksbury, ON.
• Produces Polar fleece.
• 21 Shipments
• Mean 8.8 Days
• Std Dev. 0.13
• Canadian Customer
• No Team drivers !
• Pass the Normality Test.
Burke Mills Culp Weaving Dan River
Huntingdon Mills
• AKRA uses different carriers in all of this customers, depending on availability and price!
• Located in Sumter, SC.
• Produces Mattress & thicking and upholstery.
• 58 Shipments
• Mean 5.3 Days
• Std Dev. 0.34
• No Team drivers !
• Inventory Buffer on site 3 weeks.
• Pass the Normality Test.
Bluementhal Mills
AKRA's ConclusionsWe have found some important factors that affect variability, when shipping by truck to The United States and Canada.
• Inspection by U.S. Customs.
• Driver availability at the border.
• Using different carriers or using a dedicated carrier, that reduces variability.
• Traffic jams at border.
• Weather conditions.
Customer Location Normal Dist.Blumenthal Mills Inc. Sumter, SC YESBurke Mills, Inc. Valdese, NC YESCulp Weaving Inc. Monroe, NC YESDan River Inc. Danville, VA YESGuilford Mills Inc. Monroe, NC YESHuntindong Mills Hawksbury, ON YESRayonese Textile Co. St. Jerome, PQ NO
General Conclusions
Truck
Rail
Vessel
Barge
Air
Lead-Time Variability Volume Costs
Mid-Small
Mid-Large
Large
Large
Small
Low
Low
High
Mid-Low
Mid-High
Small
Mid-Small
Large
Large
Mid-Large
High
Low
Low
Low
Medium