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Ford Motor Company’s Finished Vehicle Distribution System April 2001

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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  1. 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

  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. 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

  5. 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

  6. The Need for Speed • Other Incentives • Damage • Flexibility • Others?

  7. The Price • Inventory at the cross dock • Added distance traveled • Handling at the cross dock • Capital costs of the cross dock

  8. 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

  9. 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.

  10. 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

  11. Old Delivery Design • Push Network • Vendor sub systems optimized for individual segments • Little to no visibility • Mixing Centers not used effectively

  12. 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

  13. Design Process • Truck vs Rail delivery • Allocate Dealers (FIPS) to Ramps • Route Flows through Rail Network

  14. 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];

  15. Old Ramp AllocationSouthern US Dealers sourced bymultiple ramps

  16. New Ramp AllocationSouthern US Dealers sourced by single ramps

  17. New Allocation of Dealers to RampsMainland US

  18. Flows through the Rail Network • Objective is NOT Freight cost!

  19. The Objective IS • Speed • Capital • Land

  20. The Promise • Speed • Unit trains bypass hump yards

  21. Laurel, Montana Orilla, Washington The Promise • Capital & Land Time

  22. 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

  23. The Price • Inventory at the cross dock • Handling at the cross dock • Capital costs of the cross dock • Added distance traveled

  24. 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

  25. Laurel, Montana Orilla, Washington Inventory at the Plants • Half a rail car full for each destination Time

  26. Laurel, Montana Orilla, Washington Inventory at the Mixing Centers • Half a rail car full for each destination Time

  27. Mira L. Orilla Laurel Benicia Denver Workload at the Mixing Centers Rail car holds 5 vehicles • Unpredictable Orilla Benicia Mira Loma Laurel Denver

  28. 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

  29. 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

  30. Consolidation for Speed • Unit Trains of 15-20 rail cars don’t stop at • mixing yards • Trade moving inventory for stationary • inventory

  31. 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

  32. 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]

  33. 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];

  34. 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];

  35. Model • Large Model • Lots of Variables: Many Paths • Lots of Constraints: DefineUseLane • The LP relaxation is nearly always integral

  36. New Rail Lanes Reduced plant destinations

  37. 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

  38. 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

  39. Benefits • Ford • Dealers • Rail Carriers • Auto Haulers

  40. Benefits - Ford • On-time delivery • Competitive edge • Cost control

  41. Benefits - Dealers • Reduced inventories • Increased customer satisfaction

  42. Benefits - Rail Carriers • Improved equipment utilization (reduced capital • expenditures) • Visibility and planning capabilities • Synergies with existing UPS traffic • Increased cooperation

  43. Benefits - Auto Haulers • Expanded dealer delivery hours • Visibility and planning capability • Improved asset utilization • Increased cooperation

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