Identify location for multi-facility regional distribution center
description
Transcript of Identify location for multi-facility regional distribution center
No part of it may be circulated, quoted, or reproduced for distribution outside without prior written approval from Hamilton Sundstrand and Team Kim
ISyE 6203 Term Project
December 3, 2009
Team Kim
H. Milton Stewart School of Industrial and Systems Engineering
Georgia Institute of Technology
Identify location for multi-facility regional distribution center
2
Agenda
I Initiate
II Analyze
III Envision
IV Design
V Recommendation
VI Appendix
3
I. Initiate > Project Members
Hamilton Sundstrand Project Representative
Dang Huynh – Global Logistics Manager Marc A. Bartos – Global Logistics Analyst
ISYE 6203 Project Group ‘Team Kim’
Hangil Kim Prabhkar N Navjyot Kaur Youngbin Park Jungbin Yim
4
I. Initiate > Project Timeline
Overall Preview for what we have done and where are we, and what we are going to do
Project Objectives & Goals
Project Timeline
Best practice benchmark
Initiate Analyze Envision
W1 W2 W3 W4 W5 W6 W7 W8 W9 W10
Project Assignment
Design
Class Presentation
Design Detailed To-Be Structure
Possible Scenarios
Future Scope
Find optimal consolidation schedule and location
Sensitivity Analysis
Gaining reliable data
Consolidation Methodology
Net benefit calculation
Hamilton Sundstrand: 1. Have bi-weekly conference call (or E-mail) if needed 2. Report Status
- four conference calls so far, fifth one is scheduled on Nov. 13th
- three presentations delivered so far
Quality Assurance: Dr. John Vande Vate
Final Delivery1st
Conference Call2nd
Conference Call3rd
Conference Call4th
Conference Call
5thConference
Call(scheduled)
Timely Communication
Agenda
I Initiate
II Recommendation
III Analyze
IV Envision
V Design
VI Appendix
6
II. Recommendation > Result
10%
90%
Shipment wt. for other routesShipment wt. for frequent routes
Ship all shipments on the following routes on
Wednesday and Friday
• SINGAPORE,ROCKFORD-Singapore• CO CLARE,MIRAMAR-Ireland• SINGAPORE,WEST HARTFORD-Singapore• WOLVERHAMPTON,SAN DIEGO-England• HALEY,ROCKFORD-Canada• FRACC IND B JUAREZ QUERETARO,SAN DIEGO-Mexico• LAVAL,ROCKFORD-Canada• SAINT-LAURENT,WINDSOR LOCKS-CANADA• HAMBURG,SAN DIEGO-Germany• RENFREW,SAN DIEGO-Canada• ZHUZHOU,SAN DIEGO-China
Top 11 frequent routes
In top 11 frequent routes,
No. of Vendors on these routes: 22
No. of Hamilton Sundstrand Co. on the routes: 7
II. Recommendation > Route Composition
0
40
80
120
160
Total
Total
# of shipments
II. Recommendation > Implementation Recommendation
In top 11 frequent routes,
There are 7 routes that only have a single supplier
– RENFREW,SAN DIEGO HALEY INDUSTRIES– ZHUZHOU,SAN DIEGO ZHUZHOU SOUTH AEROENGINE – HAMBURG,SAN DIEGO LUFTHANSA TECHNIK LOGISTIK (DE) – FRACC IND B JUAREZ QUERETARO,SAN DIEGO TURBORREACTORES SA DE
CV– WOLVERHAMPTON,SAN DIEGO HS MARSTON AEROSPACE – CO CLARE,MIRAMAR Hamilton Sundstrand – HALEY,ROCKFORD HALEY INDUSTRIES
Single supplier routes
Can be implemented right away!
9
II. Recommendation > Detailed Implementation
– LAVAL,ROCKFORD- Canada
– HAMBURG,SAN DIEGO-Germany
– COCLARE,MIRAMAR-Ireland
– SINGAPORE,ROCKFORD
– SINGAPORE,WEST- HARTFORD-Sin-gapore
Routes run by DHL USA Inc.– SAINT-LAURENT, WINDSOR LOCKS-
Canada
– HALEY,ROCKFORD-Canada
– RENFREW,SAN DIEGO-Canada
– LAVAL,ROCKFORD-canada
– SINGAPORE,ROCKFORD-Singapore
– SINGAPORE,WEST- HARTFORD-Singapore
Routes run by UPS SPS– WOLVERHAMPTON,SAN DIEGO
– HAMBURG,SAN DIEGO
– FRACC IND B JUAREZ QUERETARO,SAN DIEGO
– SAINT-LAURENT, WINDSOR LOCKS
Routes run by FedEx corp.
Possible Routes Consolidated
• WOLVERHAMPTON,SAN DIEGO -England• HAMBURG,SAN DIEGO-Germany• COCLARE,MIRAMAR-Ireland• FRACC IND B JUAREZ QUERETARO,SAN DIEGO
Consolidate by DHL USA Inc.• SAINT-LAURENT, WINDSOR LOCKS-Canada• HALEY,ROCKFORD-Canada• RENFREW,SAN DIEGO-Canada• LAVAL,ROCKFORD-Canada• SINGAPORE,ROCKFORD-Singapore• SINGAPORE,WEST- HARTFORD-Singapore
Consolidate by UPS SCS
European carrier consoli-dation Canada carrier consolidation
DHL USA INC UPS SCS
II. Recommendation > Carrier Composition
33.134
65.304
1.250 0.009 0.227 0.008 0.069
FEDERAL EXPRESS CORP DHL EXPRESS USA INCUPS SUPPLY CHAIN SOLUTIONS INC DSV AIR AND SEA INCEXPEDITORS INTL EAGLE GLOBAL LOGISTICBAX GLOBAL EAGLE GLOBAL BROKERAGE
CEVA LOG CEVA FREIGHT
EXPEDITORS INTL
IMMEDIATE WORLDWIDE TRANSPORTATION
EMO TRANS INTER-NATIONAL FREIGHT
EAGLE GLOBAL LOGISTIC
DHL EXPRESS USA INC
BAX GLOBAL
FEDERAL EXPRESS CORP
SCHENKER INC
UPS SUPPLY CHAIN SO-LUTIONS INC
II. Recommendation > Carrier Composition
Reduction in Transportation Cost
Reduction in No. of Shipments
Reduction in CBF, MPF
Original number of shipments
Shipments after New schedule
0
500
1000
1500
2000
2500
Current Wed-Fri Shipment
# of shipment
12
Agenda
I Initiate
II Recommendation
III Analyze
IV Envision
V Design
VI Appendix
13
III. Analyze
We analyze data with this procedure. In this phase, we firstly validate the raw data and make the basic consolidation model based on Hamilton Sundstrand’s suggestion
Initiate Analyze Envision Design
ComparingNet Benefit
of Consolidation
3Gaining
Reliable Data
1 Developing Basic Consolidation
Model
2
Initiate Analyze EnvisionInitiate Analyze
14
III. Analyze > 1. Gain Reliable Data
Regularize the data1-1
14
Shipper Company
BOMBARIDER AEROSPACE
BOWMILL ENGR
BOWMILL ENGR
BRADKEN
BRADKEN
BRADKEN
BRADKEN
BRUSSELS AIRLINES NV-SA
BRUSSELS AIRLINES NV-SA
…
BRUSSELS AIRLINES NV-SA
C & D AEROSPACE CANADA CO
C &D AEROSPACE CANADA CO
Shipper Company
BOMBARDIER AEROSPACE
BOWMILL ENGR
BOWMILL ENGR
BRADKEN
BRADKEN
BRADKEN
BRADKEN
C&D AEROSPACE CANADA CO
C&D AEROSPACE CANADA CO
1. Delete Airlines
2. Identify Names
(Correct Typo)
Delete data whose supplier is Airline
Emergency orders (Mostly for repairs)
Infrequent shipments
Will be used for
Macro
The raw data provided by HS had problems of the reliability - typos, lack of informa-tion, and weak linkages between files. Therefore, we cleaned raw data by following steps
15
III. Analyze > 1. Gain Reliable Data
Clean up the data1-2
JMR, DGF (Carriers’ Data)
Bill Numbe
r
Weight, Pieces
Vessel Name
Supplier
Country Export
Total Duty/ Fee
…
- DGF: 6,632 lines / JMR: 5,187 lines
- Delete data which are not matched with ‘USD YTD’ data
- Delete data whose supplier is Airline
Reliable Data
DGF: 2,388 lines
JMR: 3,028 lines
Will be used to get
Current # of
Shipments
Total Duty & Fees
before and after
Con-solidation
: Duty + Custom’s Brokerage Fee
: Supplier Identifier with US YTD
The raw data provided by HS had problems of the reliability - typos, lack of information, and weak linkages between files. Therefore, we cleaned raw data by following steps
16
III. Analyze > 1. Gain Reliable Data
Clean up the data (Cont.)1-2
US YTD (HS’s Data)
…
- YTD: 4,036 lines
- Delete data whose supplier is Airline
Reliable Data
US YTD: 4,013 lines
Will be used to get
Latitude & Longtitude
of
Suppliers/Consignees
Traffic Route
: Custom’s Brokerage Fee: Supplier Identifier with DGF/JMR
Carrier
Name
Client ID
Shipper
Name
Shipper Address
Shipper City
Shipper Zip
code
Consignee Address
The raw data provided by HS had problems of the reliability - typos, lack of informa-tion, and weak linkages between files. Therefore, we cleaned raw data by following steps
17
III. Analyze > 2. Develop Basic Consolidation Model
As-Is To-Be
Understand HS’s Basic Consolidation Concept2-1
As-Is To-Be
18
Vis
ual B
asic
for
Excel M
acro
III. Analyze > 2. Develop Basic Consolidation Model
We run the Excel Macro to calculate the reduced number of shipment according to one to seven days consolidation strategy of identical supplier, country of origin and date of shipment
Supplier NameCountry of
OriginDate of ShipmentIndex
233268293313314332338340365366367369412428430449450451524525530
A J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATIONA J WALTERS AVIATION
CACACACACACACACACACACACACACACAGBGBGBGBGBGB
09-Jan-0909-Jan-0912-Jan-0913-Jan-0913-Jan-0914-Jan-0914-Jan-0915-Jan-0915-Jan-0915-Jan-0915-Jan-0916-Jan-0920-Jan-0921-Jan-0921-Jan-0922-Jan-0922-Jan-0922-Jan-0928-Jan-0928-Jan-0929-Jan-09
268
314
338
367367367
430
451451
525
531
Consol.Index
ShipmentDecision
Don't Ship SeparatelyShipShip
Don't Ship SeparatelyShip
Don't Ship SeparatelyShip
Don't Ship SeparatelyDon't Ship SeparatelyDon't Ship Separately
ShipShipShip
Don't Ship SeparatelyShip
Don't Ship SeparatelyDon't Ship Separately
ShipDon't Ship Separately
ShipDon't Ship Separately
1. Same supplier
2. Same CoO 3. Same Date of Ship.
(1-7 days option)
Develop the basic consolidation methodology2-2
1919
III. Analyze > 3. Compare Net-benefit
Cost Reduction by Consolidation3
1 day
2 day
3 day
4 day
5 day
6 day
7 day
-
50,000
100,000
150,000
200,000
250,000
300,000
Customer Brokerage Fee
1 2 3 4 5 6 70
50000
100000
150000
200000
250000
300000
Maintenance Processing Fee
1 2 3 4 5 6 7 -
50,000
100,000
150,000
200,000
250,000
300,000
Total Saving1)
2)
It is possible to delay the shipments by no more than four days without losing net
benefit under the assumption that
- delayed shipments imply the holding cost of vendor capital and reduce the net benefit of
strategy
1) : $ per shipment2) : shipments delay options* : 1 implies shipment on the same day and 2 implies delayed by one day and so on.
*
20
Agenda
I Initiate
II Recommendation
III Analyze
IV Envision
V Design
VI Appendix
21
IV. Envision
We envision the detailed consolidation model based on previous analysis. We reflect possible and critical constraints into the basic model
Initiate Analyze Envision DesignInitiate Analyze EnvisionInitiate Analyze
Reflect the Adjusted Fee of Carriers2
Reflect the Cost of Capital Investment1
…
2222
IV. Envision > 1. Cost of Capital Investment
We need to take into account the inventory holding cost to the model because of in-creased inventory at carrier’s place
Delayed daysSame day
1 day 2 days 3 days 4 days 5 days 6 days
Total invoice spend ($)
56,267,348
56,267,348
56,267,348
56,267,348
56,267,348
56,267,348
56,267,348
Period (Days) 180 180 180 180 180 180 180
Total invoice spend/day
312,596
312,596
312,596
312,596
312,596
312,596
312,596
Holding cost ($) -
46,889
93,779
140,668
187,558
234,447
281,337 # of shipments in
period
3,054
3,054
3,054
3,054
3,054
3,054
3,054 Holding
cost/Shipment - 15 31 46 61 77 92
Savings ($) over period
101,504
123,463
138,240
149,677
153,121
153,129
154,008
Savings ($)/day 564 686 768 832 851 851 856
Savings ($)/shipment 33 40 45 49 50 50 50
`
Net Savings = (Reduced CBF + Reduced MPF) – Inventory Holding Cost (i=15%)
23
IV. Envision > 1. Cost of Capital Investment Sensitivity Analysis
By Changing the value of interest rate, we get different net-savings shown as below, the conflict between the delay shipment strategy and cost of capital holding, would yield an upper limit on the interaction.
Case 1. Set i=15%
Even if 7 days consolidation provides the largest saving, due to the holding cost, it is not the optimal period of consolidation
Case 3. i=20%Case 1. Set i=15% Case 3. i=20%Case 1. Set i=15% Case 2. i=10%
: Savings/Shipme
nt
: Holding cost/Shipment : Net Savings/Shipment
1)
2)
2)
1) : $ per shipment2) : shipments delay options* : 1 implies shipment on the same day and 2 implies delayed by one day and so on.
*
24
Agenda
I Initiate
II Recommendation
III Analyze
IV Envision
V Design
VI Appendix
25
V. Design
We locate the consolidation points in some country
Initiate Analyze Envision DesignInitiate Analyze EnvisionInitiate Analyze
Example: Carrier Consolidation in Europe2
Location of Consolidation Points1
Future scope for Consolidation of shipment 3
26
V. Design > 1. Location of Consolidation Points
In addition to the principles of the basic consolidation model, we firstly concentrate on establishing consolidation point to the country where the shipments occurs more often
Current shipper scenario
Canada32%
Eu-rope23%
etc.45%
no. of shipments
Canada
20%
Eu-rope42%
etc.38%
Invoice value
Top freight sources 55% of shipments
62% of invoice value are from
Canada
Europe
Option 1. Consolidate Carriers
Focused on reduction of freight cost by increasing share of business to top carriers
Option 2. Find possible consolidation points for Cross dock
Focused on freight cost, MPF, and CBF
Future scope
1. # of Shipments
2. Invoice Value
27
V. Design > 2. Example: Carrier Consolidation in Europe
In addition to the principles of the basic consolidation model, we firstly concentrate on establishing consolidation point to the country where the shipments occurs more often
Top 4 shipper countries in Europe
GB IE FR DE
22
12
4.4 3.3
invoice(%)
GB IE FR DE
6
11
2.61.8
shipment(%)
Top 2 carriers chosen for
consolidation based on
# of shipments
Total invoice amount
Total duty/fees
Top 2 carriers chosen for
consolidation
Federal Express
Lufthansa
The net increase in business for
these carriers 20% of the current
size of business with Hamilton
Sundstrand
28
V. Design > 3.Futurescope for Consolidation of shipments
Sunday Monday Tuesday Wednesday Thursday Friday Saturday
87
219
343
545
461
297
436
136 145
306 327
604
393
477
97
293248
278
450506 516
121176
453
211
387359
681
154
259
328
407
328 331
581
128
341
413
280
526
289
411
97
242
536
395439
399
280
1-DAY 2-DAY 3-DAY 4-DAY 5-DAY 6-DAY 7-DAY
From the current consolidation strategy to delay shipments, the distribution of
shipments over the week is still spread over all the seven days of the week. So there is
still opportunity to improve the savings by consolidating the shipments
days within the week. (i.e. ship only Monday or Tuesday or Monday &
Tuesday)
The upper limit on the interaction is still four days as per our earlier analysis
# of Ship-ments
29
Thank you
30
Agenda
I Initiate
II Recommendation
III Analyze
IV Envision
V Design
VI Appendix
31
Appendix.
1. Macro codes
32
Appendix.
2. Excel works
1 DAY 4-DAY
Row Labels Sum of Invoice value Row Labels Sum of Invoice value
1 1932504.13 1 3406935.67
2 7289085.88 2 7542407.39
3 10303304.63 3 20457990.87
4 23714597.35 4 7322334.41
5 19498828.74 5 11515823.03
6 11064280.93 6 11387655.93
7 20370059.94 7 32539514.3
(blank) (blank)
Grand Total 94172661.6 Grand Total 94172661.6
2 DAY 5-DAY
Row Labels Sum of Invoice value Row Labels Sum of Invoice value
1 5416171.92 1 5508167.62
2 5278973.19 2 12229606.32
3 8725797.05 3 10883684.07
4 10307653.92 4 20469974.62
5 26410491.77 5 9325334.08
6 16561329.33 6 10656385
7 21472244.42 7 25099509.89
(blank) (blank)
Grand Total 94172661.6 Grand Total 94172661.6
3-DAY 6-DAY
Row Labels Sum of Invoice value Row Labels Sum of Invoice value
1 2972062.58 1 2848829.3
2 15104461.53 2 16843027.05
3 6339727.27 3 17812951.06
4 9999776.48 4 10254050.89
5 16436892.7 5 23508235.33
6 20576098.34 6 8896763.81
7 22743642.7 7 14008804.16
(blank) (blank)
Grand Total 94172661.6 Grand Total 94172661.6
33
Appendix.
2. Excel works
Ship-per coun-try
MEX MEX MEX MEX MEX MEX MEX MEX MEX MEX MEX MEX MEX MEX MEX
Ship-per city
SALTILLO
SANTA CATARINA
APO-DACA
APO-DACA
AR-VADA
CI-DAD 635-2 ZONA IND EL PO-TOSI
ES-COBEDO
FRACC IND B JUAREZ QUERETARO
MEX-ICO
MONTER-REY
QUERETARO
SAN LUIS PO-TOSI
SAN LUIS PO-TOSI
WINDSOR LOCKS
SAN SAL-VADOR
Lati-tude 25.36 25.683
3325.766
6725.766
67 39.88 23 18.91667 23 23 25.666
6720.625
56 22.15 22.15 41.92917 13.7
longi-tude
-100.98
-100.46
7-100.2 -100.2 -
105.11 -102-
97.1167
-102 -102-
100.317
-100.37
2
-100.98
3
-100.98
3
-72.627
8
-89.216
7
Shipper name No of shipments
In-voice value
Shipper country Shipper city Latitude Direc-
tionlongi-tude
PARKWAY PRODUCTS DE ME-XICO S DE RL 5 5138.
53MEX SALTILLO 25.36N -100.98 0 62.816
590.368
6690.368
661659.6
91282.07
69819.38
98282.07
69282.07
6974.792
29530.10
96356.93
59356.93
593182.1
711786.8
61
FUNDICION AGUILAS SA DE CV 1 920.6
1MEX SANTA CATARINA 25.683333N
-100.46
7
62.8165 0 28.274
6528.274
651636.5
21336.37
82827.46
64336.37
82336.37
8215.146
23562.48
25396.38
14396.38
143119.8
941776.2
82
EZI METALES SA DE CV 87 359081MEX APODACA 25.76666
7N -100.2 90.36866
28.27465 0 0 1634.2
76357.58
03824.94
96357.58
03357.58
0316.132
22571.93
53409.95
26409.95
263093.9
231764.8
12PROCESOS TERMICOS Y ES-PECIALES 28 20279
.9MEX APODACA 25.766667N -100.2 90.368
6628.274
65 0 0 1634.276
357.5803
824.9496
357.5803
357.5803
16.13222
571.9353
409.9526
409.9526
3093.923
1764.812
SUNDYNE CORP 2 1633.12MEX ARVADA 39.88N -
105.111659.6
911636.5
211634.2
761634.2
76 0 1899.664
2453.546
1899.664
1899.664
1642.045
2187.919
2009.679
2009.679
2722.983
3298.878
TIGHITCO LATINOAMERICA SA DE CV 2 19275MEX CIDAD 635-2 ZONA IND
EL POTOSI 23N -102 282.0769
336.3782
357.5803
357.5803
1899.664 0 680.52
06 0 0 342.0562
312.9715
140.8167
140.8167
3438.133
1698.103
TECNOLOGIA PROCESOS Y MAQUINAR 1 330.7
2MEX ESCOBEDO 18.916667N
-97.116
7
819.3898
827.4664
824.9496
824.9496
2453.546
680.5206 0 680.52
06680.52
06819.48
12390.02
9539.73
2539.73
23447.7
791023.0
25
TURBORREACTORES SA DE CV 87 22540
9MEX FRACC IND B JUAREZ QUERETARO 23N -102 282.07
69336.37
82357.58
03357.58
031899.6
64 0 680.5206 0 0 342.05
62312.97
15140.81
67140.81
673438.1
331698.1
03
TIGHITCO LATINOAMERICA SA DE CV 1 1089.
76MEX MEXICO 23N -102 282.0769
336.3782
357.5803
357.5803
1899.664 0 680.52
06 0 0 342.0562
312.9715
140.8167
140.8167
3438.133
1698.103
METALIZADOS Y MAQUINA-DOS DE MX 2 1043.
12MEX MONTERREY 25.666667N
-100.31
7
74.79229
15.14623
16.13222
16.13222
1642.045
342.0562
819.4812
342.0562
342.0562 0 560.57
45396.86
16396.86
163110.0
531764.6
16
TURBORREACTORES SA DE CV 6 14747
.9MEX QUERETARO 20.62555555N
-100.37
2
530.1096
562.4825
571.9353
571.9353
2187.919
312.9715
390.029
312.9715
312.9715
560.5745 0 180.94
35180.94
353515.0
61412.4
74
HAMILTON SUNDSTRAND (MX) 1 479.4
3MEX SAN LUIS POTOSI 22.15N-
100.983
356.9359
396.3814
409.9526
409.9526
2009.679
140.8167
539.732
140.8167
140.8167
396.8616
180.9435 0 0 3432.6
61558.3
21
TIGHITCO LATINOAMERICA SA DE CV 12 22125
.5MEX SAN LUIS POTOSI 22.15N-
100.983
356.9359
396.3814
409.9526
409.9526
2009.679
140.8167
539.732
140.8167
140.8167
396.8616
180.9435 0 0 3432.6
61558.3
21
HAMILTON SUNDSTRAND DOCK J BLD (MX) 1 578.1
4MEX WINDSOR LOCKS 41.9291667N
-72.627
8
3182.171
3119.894
3093.923
3093.923
2722.983
3438.133
3447.779
3438.133
3438.133
3110.053
3515.06
3432.66
3432.66 0 3522.8
53
OXIGENOS Y GASES DE 1 449.29MEX SAN SALVADOR 13.7N
-89.216
7
1786.861
1776.282
1764.812
1764.812
3298.878
1698.103
1023.025
1698.103
1698.103
1764.616
1412.474
1558.321
1558.321
3522.853 0