XYZ Company Supply Chain Optimization Project Network Optimization

of 42 /42
1 XYZ Company Supply Chain Optimization Project Network Optimization Date: 04/25/2006 ISyE 6203: Transportation and Supply Chain Management Prepared By: Jayson Choy Christie Williams Andy Ang Thomas Ou Naragain Phumchusri Raghav Himatsingka

Embed Size (px)

description

ISyE 6203: Transportation and Supply Chain Management. XYZ Company Supply Chain Optimization Project Network Optimization. Prepared By: Jayson Choy Christie Williams Andy Ang Thomas Ou Naragain Phumchusri Raghav Himatsingka. Date: 04/25/2006. Agenda. Introduction Key Deliverables - PowerPoint PPT Presentation

Transcript of XYZ Company Supply Chain Optimization Project Network Optimization

  • XYZ Company

    Supply Chain Optimization ProjectNetwork Optimization

    Date: 04/25/2006ISyE 6203: Transportation and Supply Chain ManagementPrepared By:Jayson ChoyChristie WilliamsAndy AngThomas OuNaragain Phumchusri Raghav Himatsingka

  • AgendaIntroduction

    Key Deliverables

    Data Analysis

    Mathematical Model

    Recommendation

    Sensitivity Analysis

    Conclusion

  • IntroductionLocations in Florida and California

    Each location has Multiple Operations

    Suppliers across USA

    Supplier shipments may be parcel, less-than-truckload or full truckload, some must be frozen or chilled

    Project goal: Reduce inbound transportation costs across the business while meeting customer service requirements.

  • TimelinePhaseProject kick-off & Deliverables Rationalization Data Cleansing & ValidationPreliminary ModelingValidation of ModelGeneration of results & sensitivity AnalysesJanFebMarApr

  • AgendaIntroduction

    Key Deliverables

    Data Analysis

    Mathematical Model

    Recommendation

    Sensitivity Analysis

    Conclusion

  • Key DeliverablesCreate a graphic illustration of Current North American Supply Chain network

    Document Current Volumes and Freight spend by mode to each location and in total

    Identify and recommend North American Consolidation Points for most efficient route and capacity utilization

    Create a graphic illustration of the Recommended New Supply Chain Network with all consolidation facility representations and conceptual lanes to each location

  • California and Florida Supplier Locations

  • Problem DefinitionFlorida

    Chart1

    0.5437582453

    0.4562417547

    Amount Paid

    Breakdown of Volume by Transportation Costs

    Sheet1

    WeightAmount PaidShipment Count

    Florida96%Florida54%Florida76%

    California4%California46%California24%

    Florida964552707400967121875

    California4119900620980037810

    10057517013610767159685

    Sheet1

    0

    0

    Weight

    Breakdown of Volume by Weight

    Sheet2

    0

    0

    Amount Paid

    Breakdown of Volume by Transportation Costs

    Sheet3

    0

    0

    Shipment Count

    Breakdown of Volume by Shipment Frequency

    Chart2

    0.9590366089

    0.0409633911

    Weight

    Breakdown of Volume by Weight

    Sheet1

    WeightAmount PaidShipment Count

    Florida96%Florida54%Florida76%

    California4%California46%California24%

    Florida964552707400967121875

    California4119900620980037810

    10057517013610767159685

    Sheet1

    Weight

    Breakdown of Volume by Weight

    Sheet2

    Amount Paid

    Breakdown of Volume by Transportation Costs

    Sheet3

    Shipment Count

    Breakdown of Volume by Shipment Frequency

    Chart3

    0.763221342

    0.236778658

    Shipment Count

    Breakdown of Volume by Shipment Frequency

    Sheet1

    WeightAmount PaidShipment Count

    Florida96%Florida54%Florida76%

    California4%California46%California24%

    Florida964552707400967121875

    California4119900620980037810

    10057517013610767159685

    Sheet1

    Weight

    Breakdown of Volume by Weight

    Sheet2

    Amount Paid

    Breakdown of Volume by Transportation Costs

    Sheet3

    Shipment Count

    Breakdown of Volume by Shipment Frequency

  • Problem Definition36%26%13%8%11%6%LTL: Greatest Opportunity for Savings

    Chart6

    0.36

    0.26

    0.06

    0.11

    0.08

    0.13

    Breakdown of Florida's Volume by Cost

    Sheet1

    WeightAmount PaidShipment Count

    Florida96%Florida54%Florida76%

    California4%California46%California24%

    Florida964552707400967121875

    California4119900620980037810

    10057517013610767159685

    Sheet1

    0.9590366089

    0.0409633911

    Weight

    Breakdown of Volume by Weight

    Sheet2

    0

    0

    Amount Paid

    Breakdown of Volume by Transportation Costs

    Sheet3

    0.763221342

    0.236778658

    Shipment Count

    Breakdown of Volume by Shipment Frequency

    Breakdown of Florida's Volume by Cost

    FTL36%

    LTL26%

    Parcel - Ground6%

    Parcel - Air11%

    Produce8%

    Frozen13%

    Breakdown of Florida's Volume by Cost

  • Problem DefinitionFocus on Consolidation of LTL shipments to Florida

    Eliminated Frozen and Chilled shipments from the Optimization model

    Included most FTL shipments by breaking them down

  • AgendaIntroduction

    Key Deliverables

    Data Analysis

    Mathematical Model

    Recommendation

    Sensitivity Analysis

    Conclusion

  • Data Analysis

    WDW Florida Amount Paid

    4292175.78

    2533464.77

    0

    10125.59

    555433.97

    9766.41

    Florida Breakdown of Individual Business Units by Total Amount Paid

    Food (FOB)0%

    WDW Florida Shipment Count

    107240

    2323

    11757

    91

    420

    44

    WDW Florida Breakdown of Individual Business Units by Shipment Count

    Sheet1

    Summary of Florida Business Units

    WeightAmount PaidShipment Count

    Total723007097400966.51999999110118

    Tab 12

    WeightAmount PaidShipment Count

    Total24154560.5083998NA11757

    Tabs1MDSE2MDSE3MDSE4MDSE5MDSE7MDSE9MDSE10MDSETotal

    Weight28766051563124829649944392461689563,500,110338932916678234

    Amount Paid869452.921,156.62556.7125346.620000004186781.8399999991119406.92259232528624.6

    Shipment Count3096118.00172197402901195919628953581

    Tabs1 Stop Off2 Stop Off3 Stop Off4 Stop OffTotal

    Weight31933491798454422141892094004617

    Amount Paid824978.340000001150,816.22515708.619999993272047.9999999981763551.17999999

    Shipment Count27673,514.00355191185953659

    Tabs11 Food4 Food5 Food6 FoodTotal

    Weight3961182365076398558141288350446786199

    Amount Paid48953.361009715.2553688.69921107.522533464.77

    Shipment Count15811204026432323

    TabsCostumingTotalFlorida Breakdown by Business UnitsWeightAmount PaidShipment CountTotal (Merchandise)

    Weight6387063870Merchandise206828514292175.78107240206828514292175.78107240

    Amount Paid10125.5910125.59Food467861992533464.772323

    Shipment Count9191Food (Tab 12)24154560.5083998NA11757

    Costuming6387010125.5991

    Tabs8 Gen SuppliesTotalGeneral Supplies4726109555433.97420

    Weight47261094726109Others416809766.4144

    Amount Paid555433.97555433.97Total96455269.50839987400966.52121875

    Shipment Count420420

    TabsOthersTotal

    Weight4168041680

    Amount Paid9766.419766.41

    Shipment Count4444

    WDW Florida Weight

    20682851

    46786199

    24154560.5083998

    63870

    4726109

    41680

    WDW Florida Breakdown of Individual Business Units by Weight

    Sheet2

    Sheet3

  • Data Analysis

    WDW Florida Amount Paid

    4292175.78

    2533464.77

    0

    10125.59

    555433.97

    9766.41

    WDW Florida Breakdown of Individual Business Units by Total Amount Paid

    WDW Florida Shipment Count

    107240

    2323

    11757

    91

    420

    44

    Florida Breakdown of Individual Business Units by Shipment Count

    Food (FOB)10%

    Sheet1

    Summary of Florida Business Units

    WeightAmount PaidShipment Count

    Total723007097400966.51999999110118

    Tab 12

    WeightAmount PaidShipment Count

    Total24154560.5083998NA11757

    Tabs1MDSE2MDSE3MDSE4MDSE5MDSE7MDSE9MDSE10MDSETotal

    Weight28766051563124829649944392461689563,500,110338932916678234

    Amount Paid869452.921,156.62556.7125346.620000004186781.8399999991119406.92259232528624.6

    Shipment Count3096118.00172197402901195919628953581

    Tabs1 Stop Off2 Stop Off3 Stop Off4 Stop OffTotal

    Weight31933491798454422141892094004617

    Amount Paid824978.340000001150,816.22515708.619999993272047.9999999981763551.17999999

    Shipment Count27673,514.00355191185953659

    Tabs11 Food4 Food5 Food6 FoodTotal

    Weight3961182365076398558141288350446786199

    Amount Paid48953.361009715.2553688.69921107.522533464.77

    Shipment Count15811204026432323

    TabsCostumingTotalFlorida Breakdown by Business UnitsWeightAmount PaidShipment CountTotal (Merchandise)

    Weight6387063870Merchandise206828514292175.78107240206828514292175.78107240

    Amount Paid10125.5910125.59Food467861992533464.772323

    Shipment Count9191Food (Tab 12)24154560.5083998NA11757

    Costuming6387010125.5991

    Tabs8 Gen SuppliesTotalGeneral Supplies4726109555433.97420

    Weight47261094726109Others416809766.4144

    Amount Paid555433.97555433.97Total96455269.50839987400966.52121875

    Shipment Count420420

    TabsOthersTotal

    Weight4168041680

    Amount Paid9766.419766.41

    Shipment Count4444

    WDW Florida Weight

    20682851

    46786199

    24154560.5083998

    63870

    4726109

    41680

    WDW Florida Breakdown of Individual Business Units by Weight

    Sheet2

    Sheet3

  • Data Analysis

    WDW Florida Amount Paid

    4292175.78

    2533464.77

    0

    10125.59

    555433.97

    9766.41

    WDW Florida Breakdown of Individual Business Units by Total Amount Paid

    WDW Florida Shipment Count

    107240

    2323

    11757

    91

    420

    44

    WDW Florida Breakdown of Individual Business Units by Shipment Count

    Sheet1

    Summary of Florida Business Units

    WeightAmount PaidShipment Count

    Total723007097400966.51999999110118

    Tab 12

    WeightAmount PaidShipment Count

    Total24154560.5083998NA11757

    Tabs1MDSE2MDSE3MDSE4MDSE5MDSE7MDSE9MDSE10MDSETotal

    Weight28766051563124829649944392461689563,500,110338932916678234

    Amount Paid869452.921,156.62556.7125346.620000004186781.8399999991119406.92259232528624.6

    Shipment Count3096118.00172197402901195919628953581

    Tabs1 Stop Off2 Stop Off3 Stop Off4 Stop OffTotal

    Weight31933491798454422141892094004617

    Amount Paid824978.340000001150,816.22515708.619999993272047.9999999981763551.17999999

    Shipment Count27673,514.00355191185953659

    Tabs11 Food4 Food5 Food6 FoodTotal

    Weight3961182365076398558141288350446786199

    Amount Paid48953.361009715.2553688.69921107.522533464.77

    Shipment Count15811204026432323

    TabsCostumingTotalFlorida Breakdown by Business UnitsWeightAmount PaidShipment CountTotal (Merchandise)

    Weight6387063870Merchandise206828514292175.78107240206828514292175.78107240

    Amount Paid10125.5910125.59Food467861992533464.772323

    Shipment Count9191Food (Tab 12)24154560.5083998NA11757

    Costuming6387010125.5991

    Tabs8 Gen SuppliesTotalGeneral Supplies4726109555433.97420

    Weight47261094726109Others416809766.4144

    Amount Paid555433.97555433.97Total96455269.50839987400966.52121875

    Shipment Count420420

    TabsOthersTotal

    Weight4168041680

    Amount Paid9766.419766.41

    Shipment Count4444

    WDW Florida Weight

    20682851

    46786199

    24154560.5083998

    63870

    4726109

    41680

    Florida Breakdown of Individual Business Units by Weight

    Food (FOB)25%

    Sheet2

    Sheet3

  • AgendaIntroduction

    Key Deliverables

    Data Analysis

    Mathematical Model

    Recommendation

    Sensitivity Analysis

    Conclusion

  • Supplier Locations (LTL Florida)(Data Aggregation by 3-Digit Zip Code)

  • To Consolidate LTL Shipments into FTL ShipperXYZ CompanyShipperShipperShipperCPPresent SituationProposed Solution

  • Proposed 2-Step ModelStep 1: Set Covering Model (SCM)Step 2: Network Design Model (NDM)To Generate Potential Consolidation Point CandidatesTo Determine which Consolidation Points to Open/ Close

  • Step 1: Set Covering Model (SCM)

    Maximize sum(i in Suppliers) y[i]

    s.t {sum(i in Suppliers) x[i]

  • SCM Results: 30 Consolidation PointsNext Step:CP Candidates will be fed into the Network Design Model (NDM)

  • Step 2: Network Design Model (NDM)

    Model Objectives : To Decide which Consolidation Points to open or close To Determine whether Suppliers should Ship Direct to the company To Assign Suppliers to Consolidation Points To Open or Close?To Open or Close?To Open or Close?To Open or Close?To Open or CloseTo Open or Close?To Open or Close?To Open or Close?To Open or Close?

  • XYZ CompanyShipperDirect LTLShipmentConstraint I: If Supplier is not a Candidate CP We either serve this 3 Digit zip via LTL shipments to the destination or via a consolidation pointCPLTLShipment

  • Step 2: Network Design Model (NDM)

    Constraint II: If Supplier is a Candidate CP Case 1: If NOT OPEN We send LTL direct or via a designated CP CPXYZ CompanyCase 1

  • Step 2: Network Design Model (NDM)

    Constraint II: If Supplier is a Candidate CP Case 2: If OPEN We consolidate at CP and send FTL direct CPXYZ CompanyCase 2

  • Step 2: Network Design Model (NDM)

    Constraint III: Load Factor of 0.8Total Inflow into CP < = [ 0.8 * Total Truckloads ]

    CPConstraint IV: FrequencyMinimum Truckloads going through an Open CP per year

    > = 52LTLLTLLTLie at least 1 truckload per week

  • AgendaIntroduction

    Key Deliverables

    Data Analysis

    Mathematical Model

    Recommendation

    Sensitivity Analysis

    Conclusion

  • 5 CP Locations

  • Assignment of Suppliers

  • CP Location I: Charlotte, NC

  • CP Location II: Atlanta, GA

  • CP Location III: Los Angeles, CA

  • CP Location IV: Gulfport, MS

  • CP Location V: Jackson, KY

  • LTL Direct Shipments

  • Cost SavingsLess than 8% Reduction8% Reduction

    Chart1

    1920Cost Before Optimization ('000)Cost Before Optimization ('000)

    1770Cost After Optimization ('000)Cost After Optimization ('000)

    Sheet1

    Cost Before Optimization ('000)Cost After Optimization ('000)

    19201770

  • Summary

  • AgendaIntroduction

    Key Deliverables

    Data Analysis

    Mathematical Model

    Recommendation

    Sensitivity Analysis

    Conclusion

  • Sensitivity Analysis

    Chart4

    5

    5

    3

    2

    1

    1

    1

    Shipments Per week

    No. of Consolidation Points

    Effect of Shipment Frequency on CP

    Sheet1

    Frequency per weekShipments per yearNo. of CPLTL-NFTL-N1FTL-N2FTL-NTotal NewLTL newFTL newTotal newLTL oldFTL oldTotal oldSavingsPercentage savings

    15251,339,333431,3381,195,0831,626,4212,965,7541,726,4321,195,0832,921,5151763375268404344474181,481,66433.3%

    210451,304,916533,5511,195,0831,728,6343,033,5501,784,5091,195,0832,979,5921763375268404344474181,413,86831.8%

    315631,186,306727,0871,195,0831,922,1703,108,4761,840,0361,195,0833,035,1191763375268404344474181,338,94230.1%

    420821,791,214157,0481,195,0831,352,1313,143,3451,927,0541,195,0833,122,1371763375268404344474181,304,07329.3%

    526011,756,607196,3101,195,0831,391,3933,148,0001,933,2861,195,0833,128,3691763375268404344474181,299,41829.2%

    631211,961,931235,5721,195,0831,430,6553,392,5861,938,2851,195,0833,133,3681763375268404344474181,054,83223.7%

    736411,973,857274,8341,195,0831,469,9173,443,7741,946,3471,195,0833,141,4301763375268404344474181,003,64422.6%

    Sheet2

    No. of CP2770730301928803955642719

    5

    5

    3

    2

    1

    1

    1

    Sheet3

    No. of CPFrequency per week

    51

    52

    33

    24

    15

    16

    17

    Total oldTotal newFrequency per week

    4,447,4182,965,7541

    4,447,4183,033,5502

    4,447,4183,108,4763

    4,447,4183,143,3454

    4,447,4183,148,0005

    4,447,4183,392,5866

    4,447,4183,443,7747

    Percentage savingsFrequency per week

    33.3%1

    31.8%2

    30.1%3

    29.3%4

    29.2%5

    23.7%6

    22.6%7

    Sheet3

    Shipments Per week

    No. of Consolidation Points

    Effect of Shipment Frequency on CP

    2,965,754 3,033,550 3,108,476 3,143,345 3,148,000 3,392,586 3,443,774

    Shipments Per Week

    Total Trucking Cost

    Effect of Shipment Frequency on Trucking Cost

    Percentage savings

    Shipments Per Week

    Savings in Total Trucking Cost

    Effect of Shipment Frequency on Percentage Savings

  • Sensitivity Analysis

  • AgendaIntroduction

    Key Deliverables

    Data Analysis

    Mathematical Model

    Recommendation

    Sensitivity Analysis

    Conclusion

  • ConclusionKey LearningCounter intuitive peculiarities of LTL cost structure (small volumes, backhauling etc)

    Moving ForwardMilk run study on remaining LTL direct volumesOptimization of other shipment modes (e.g. parcel, frozen, chilled etc)Optimization of Florida bound shipments

  • Q & A

    LTL looked the most promising for savings!Currently, the company does some consolidation of LTL to FTL. However, it is not optimized. The company was very adamant that we not ignore these shipments in our model. Only single shipments of over 18000 lbs will be eliminated from the model.LTL looked the most promising for savings!Currently, the company does some consolidation of LTL to FTL. However, it is not optimized. The company was very adamant that we not ignore these shipments in our model. Only single shipments of over 18000 lbs will be eliminated from the model.LTL looked the most promising for savings!Currently, the company does some consolidation of LTL to FTL. However, it is not optimized. The company was very adamant that we not ignore these shipments in our model. Only single shipments of over 18000 lbs will be eliminated from the model.The company requested we breakdown the shipments by business unit. The business unit does not will not directly influence our model- but it gives visibility to the company as to how the current budget is divided and how potential savings may be split among the various units.The next 3 slides show the business unit breakdownWe would like to smooth out fluctuations in freight volumes by inserting a load factor of 0.8 into our model.

    % reduction should be less than 8% because we are breaking up FTL shipments into LTL shipments which we count as total LTL costThis is due to the incomplete FTL data from xyz

    Initial Cost should be less than 1.92 million, it is based on the assumption that all LTL are directly sent to xyz. The current situation is that some of them are already consolidated