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GLOBAL LOGISTICS, CAUSES OF VARIATION

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

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GLOBAL LOGISTICS, CAUSES OF VARIATION

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  1. GLOBAL LOGISTICS, CAUSES OF VARIATION

  2. 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

  3. International Shipping • Production facilities located worldwide • bulk 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

  4. Example: US to Australia IP Mills (Southeast US) Ocean Freight 30-60 days Rail 4-10 days (depends on origin) Freight Forwarder (New Orleans) Sydney, Melbourne, Brisbane

  5. Closer Look at Ocean Freight • Statistics calculated from quoted transit times for IP’s contracted carriers • Why the large discrepancy between carriers ?

  6. Carrier Differences • Primary Factor is Resource Allocation • If US to Australia is a primary lane • vessels make the trip non stop • shipments aren’t transferred at an intermediary port • IF US to Australia is a secondary lane • vessels will stop in an intermediary port (most likely Asia) • Shipments are transferred to different vessel before reach final stop

  7. Transit Time Variation by Carrier Primary Carriers Secondary Carriers • Much less variable than by secondary carrier • Typically more expensive • Primary factors • missing departure due to fumigation requirements • mechanical failure • Human error • Usually no more than 7 days off • More variable • But usually less expensive • Primary factors • Missing connections in intermediary port • missing departure due to fumigation requirements • mechanical failure • Human error • Anywhere from 7 -14 days off

  8. 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.

  9. Operations • Operation facilities in • Ashland, Kentucky • Middletown, Ohio • Rockport, Indiana • Strategic partner in Mexico • Hylsamex in Monterrey, Mexico

  10. Transportation Modes 1-3 days Rail 3-4 days Border Rail 1-2 days Barge 40-50 days Truck 1 day AKSteel Plants Hylsamex Brownsville, TX Truck 2-4 days

  11. 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

  12. 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

  13. 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.

  14. 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

  15. 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

  16. From Florida to Mex. Border Rail Shipments Normal Dist.

  17. From Louisiana Mex. Border Rail Shipments No Normal Dist.

  18. Causes Of Variation Supply Chain • Rail: • Not Direct Route • High Demand in Pick Season • Customs: • Shift to Truck • Paperwork • Traffic Congestion • Truck: • Availability

  19. 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 Quimicas

  20. Products • Poliester 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

  21. Operations of Fibras Quimicas 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. By Ship Europe 28 to 30 Days Africa 30 to 32 Days ( Morocco ) Middle East 38 to 40 Days ( Syria ) By Ship South America 20 to 25 Days Colombia 12 to 15 Days By Truck Central America 10 to 15 Days

  22. 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 !

  23. 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 ! Final Destination Canada The trucks, will have to wait their turn to cross, the traffic can go up to 1 mile.. The Cargo is sealed as Inbound, and passes without inspection. Final Destination U.S. + Var. The Truck is sent to a big facility, where it waits for an American driver, Mexican drivers still are not allowed to cross the border. If Inspection needed (determined randomly by U.S. Customs) It can delay the shipment for one whole day.

  24. 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.

  25. 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.

  26. Other Customers Burke Mills Culp Weaving Dan River • 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 Danville, VA. • Produces Bed in a Bag. • 17 Shipments • Mean 6 Days • Std Dev. 0.22 • No Team drivers ! • Pass the Normality Test. Bluementhal Mills Huntingdon Mills • 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. • 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. • AKRA uses different carriers in all of this customers, depending on availability and price!

  27. AKRA's Conclusions We 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.

  28. Truck Lead-Time Variability Volume Costs Rail Mid-Small Low Mid-Small Medium Vessel Mid-Low Mid-Large Low Mid-Large Barge Large High Low Large Air Large Mid-High Large Low Small High Small Low General Conclusions

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