Ford Motor Company’s Finished Vehicle Distribution System April 2001 Ellen Ewing Project Director UPS Logistics Dr. John V...
Agenda <ul><ul><li>Introduction </li></ul></ul><ul><ul><li>1999 Environment </li></ul></ul><ul><ul><li>Solution Approach  ...
Objectives/Motivation <ul><ul><li>Novel application of cross-docking: Rail-to-Rail </li></ul></ul><ul><ul><li>Cross-dockin...
<ul><ul><li>Financial Incentives: Capital Utilization </li></ul></ul><ul><ul><ul><li>In 1996 </li></ul></ul></ul><ul><ul><...
The Need for Speed <ul><li>Demand for land </li></ul><ul><li>22 Plants </li></ul><ul><li>54 Destination Ramps </li></ul><u...
The Need for Speed <ul><li>Other Incentives </li></ul><ul><ul><li>Damage </li></ul></ul><ul><ul><li>Flexibility </li></ul>...
 
The Price <ul><li>Inventory at the cross dock </li></ul><ul><li>Added distance traveled </li></ul><ul><li>Handling at the ...
1999 Vehicle Network Delivery Conditions <ul><ul><li>Record production levels </li></ul></ul><ul><ul><li>Demand shift from...
High 1999 Level Statistics <ul><ul><li>Assembly plants 22 </li></ul></ul><ul><ul><li>Mixing centers   5 </li></ul></ul><ul...
Ford Distribution Network Mixing Center Origin Plant Groupings Destination Ramp Planned Ramp Closure Edison Norfolk Atlant...
Old Delivery Design <ul><ul><li>Push Network </li></ul></ul><ul><ul><li>Vendor sub systems optimized for individual segmen...
Ford Goals <ul><li>Speed </li></ul><ul><ul><li>1999: Average 15 days transit time  </li></ul></ul><ul><ul><li>Goal: Maximu...
Design Process <ul><li>Truck vs Rail delivery </li></ul><ul><li>Allocate Dealers (FIPS)  </li></ul><ul><li>to Ramps </li><...
Single-Sourcing Allocation <ul><li>Var Assign{FIPS, RAMPS} binary; </li></ul><ul><li>Minimize TotalCost: </li></ul><ul><li...
Old Ramp Allocation Southern US Dealers sourced by   multiple ramps
New Ramp Allocation Southern US Dealers sourced by single ramps
New Allocation of Dealers to Ramps Mainland US
Flows through the Rail Network <ul><li>Objective is NOT Freight cost! </li></ul>
The Objective IS <ul><li>Speed </li></ul><ul><li>Capital </li></ul><ul><li>Land </li></ul>
The Promise <ul><li>Speed </li></ul><ul><li>Unit trains bypass hump yards </li></ul>
The Promise <ul><li>Capital & Land </li></ul>Time Laurel, Montana Orilla, Washington
The Promise <ul><li>Capital & Land </li></ul><ul><li>22 Plants </li></ul><ul><li>54 Destination Ramps </li></ul><ul><li>~1...
The Price <ul><li>Inventory at the cross dock </li></ul><ul><li>Handling at the cross dock </li></ul><ul><li>Capital costs...
Making the Trade-offs <ul><li>Measuring Inventory </li></ul><ul><li>In the rail network  </li></ul><ul><li>At the plants a...
Inventory at the Plants <ul><li>Half a rail car full for each destination </li></ul>Time Laurel, Montana Orilla, Washington
Inventory at the Mixing Centers <ul><li>Half a rail car full for each destination </li></ul>Time Laurel, Montana Orilla, W...
Workload at the Mixing Centers <ul><li>Unpredictable </li></ul>Rail car holds 5 vehicles Orilla Benicia Mira Loma Laurel D...
Workload at the Mixing Centers <ul><li>Balanced: Only load cars you empty </li></ul>Rail car holds 5 vehicles Orilla Benic...
Effect on Inventory <ul><li>Inventory at Mixing Center slowly grows  </li></ul><ul><li>to just over (ramps -1)(capacity -1...
Consolidation for Speed <ul><li>Unit Trains of 15-20 rail cars don’t stop at  </li></ul><ul><li>mixing yards </li></ul><ul...
Model <ul><li>Paths </li></ul><ul><ul><li>Route from Plant to Ramp </li></ul></ul><ul><ul><li>Mode used on each edge </li>...
Model <ul><li>Objective </li></ul><ul><ul><li>Minimize the number of vehicles in the pipeline </li></ul></ul><ul><ul><ul><...
Model <ul><li>Satisfy Demand </li></ul><ul><ul><li>The sum of flows on all paths between a plant and a ramp must meet dema...
Model <ul><li>Define UseLane </li></ul><ul><ul><li>For each pair of locations and mode between them write a constraint for...
Model <ul><li>Large Model  </li></ul><ul><ul><li>Lots of Variables: Many Paths </li></ul></ul><ul><ul><li>Lots of Constrai...
New Rail Lanes Reduced plant destinations
Final Outbound Rail Network with Carriers Mixing Centers Destination Ramps Union Pacific CSXT FEC BNSF Canadian Pacific Ca...
Results <ul><ul><li>Cut vehicle transit time by 26% or 4 days </li></ul></ul><ul><ul><li>$1 billion savings in vehicle inv...
Benefits  <ul><li>Ford  </li></ul><ul><li>Dealers  </li></ul><ul><li>Rail Carriers  </li></ul><ul><li>Auto Haulers   </li>...
Benefits - Ford <ul><li>On-time delivery </li></ul><ul><li>Competitive edge </li></ul><ul><li>Cost control </li></ul>
Benefits - Dealers <ul><li>Reduced inventories </li></ul><ul><li>Increased customer satisfaction </li></ul>
Benefits - Rail Carriers <ul><li>Improved equipment utilization (reduced capital  </li></ul><ul><li>expenditures) </li></u...
Benefits - Auto Haulers <ul><li>Expanded dealer delivery hours </li></ul><ul><li>Visibility and  planning capability </li>...
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Ford Motor Company's Finished Vehicle Distribution System

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  • Business plans in strategic implementation require a SWOT analysis as well as a mission and vision statement. Ford Motor Company was founded by Henry Ford in 1903 and is currently family owned. Ford released the assembly production line of the Model T in 1909 and produced planes and vehicles in World War II (Dornbach-Bender, Slade, & Thorpe, 2009). Ford Motor Company has been global (international) in operation since 1904 and dominated the car manufacture industry until 1956 when Toyota began export of its automobile to America with market share growth (Dornbach-Bender, Slade, & Thorpe, 2009).
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  • Under the old system dealerships could be fed from multiple destination ramps. This proved to be costly and more difficult to manage.
  • As you can see the new design is much cleaner and eliminates the delivery overlap from various ramps.
  • This is how the entire U.S. looks. Again, no overlapping areas.
  • The model concentrated allocated volume in fewer lanes reducing the amount of destinations built by each plant.
  • While we have touched upon the benefits, let’s review them in greater detail. There are 5 primary beneficiaries that we will address.
  • 1. The Autogistics network supports the “On Time Delivery” initiative and increases its chances for success. 2. For the first time the supply chain can be accurately analyzed by segment and activity. Core problems can be analyzed and solved in less time and with much greater accuracy. The potential for reducing system variation is a reality. 3. The manufacturer that can produce a reliable finished goods network can obtain a competitive edge in multiple ways. Increase customer satisfaction Reduce the total cost of a vehicle for manufacturer and dealer 4. Allows Ford a single source for finished vehicle logistics. 5. Car Trackers ability to measure and produce reports improves accountability throughout the supply chain and eliminates the continuous finger pointing. Key to successful systems of any type is an accurate feedback loop. That is now in place. More importantly, it allows more time to be expended solving the problem. 6. Where does this improve the cost picture? Shortened supply chain reduces the amount of assets in the chain and reduces the inventory carrying cost. A shortened and reliable chain will increase the potential for custom orders and internet orders and reduce build for inventory. Also stops additional expense of shipping diversions due to equipment shortages.
  • Inventories are maintained to provide cars for the buying public. When the source is not reliable higher inventories are maintained to ensure that stock is available and sales are not lost. The improved visibility and precision in the network allows a leaner inventory while not sacrificing sales. The ability to provide a customer an arrival date and meet that date enhances the buying experience thus increasing customer satisfaction Dealerships will be better able to plan car preparation functions due information on Car Tracker.
  • 1. If velocity of the inventory increases, as it will, then the automotive rail cars will more quickly travel through the system. Reducing the amount of equipment needed will decrease the amount of future capital expenditures. 2. Using Car Tracker will enable the rail carriers to better plan and respond to the needs of Ford. 3. By combining existing UPS intermodal traffic with automotive traffic more dedicated trains can be created easing scheduling of crews and equipment. 4. The improved visibility promotes cooperation between the carriers.
  • 1. Allows haulers to reduce equipment and maintain lot sizes. 2. Haulers will no longer have to respond with no notice. 3. Without having to deliver in a narrow window the car hauler can run multiple shifts and use the same equipment. Knowledge of what is in the supply chain enables them to increase routing effectiveness. 4. The system is no stronger than the weakest link. Getting away from optimizing sub systems through Car Tracker will force cooperation.
  • Transcript of "Ford Motor Company's Finished Vehicle Distribution System"

    1. 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. 2. Agenda <ul><ul><li>Introduction </li></ul></ul><ul><ul><li>1999 Environment </li></ul></ul><ul><ul><li>Solution Approach </li></ul></ul><ul><ul><li>Network Design </li></ul></ul><ul><ul><li>Implement New Strategy </li></ul></ul><ul><ul><li>Results to Date </li></ul></ul><ul><ul><li>Summary </li></ul></ul>
    3. 3. Objectives/Motivation <ul><ul><li>Novel application of cross-docking: Rail-to-Rail </li></ul></ul><ul><ul><li>Cross-docking for Speed </li></ul></ul><ul><ul><li>Role of modeling </li></ul></ul><ul><ul><li>Load-driven System </li></ul></ul><ul><ul><li>Modeling Inventory in Network Design </li></ul></ul>
    4. 4. <ul><ul><li>Financial Incentives: Capital Utilization </li></ul></ul><ul><ul><ul><li>In 1996 </li></ul></ul></ul><ul><ul><ul><ul><li>Ford produced 3.9 million vehicles in the US </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Avg. transit time 15+ days </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Avg. vehicle revenue $18,000 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Value of pipeline inventory: > $2.8 Billion </li></ul></ul></ul></ul><ul><ul><ul><ul><li>One day reduced transit time: </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>$190 Million reduction in pipeline inv. </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>1,400 fewer railcars </li></ul></ul></ul></ul></ul>The Need for Speed
    5. 5. The Need for Speed <ul><li>Demand for land </li></ul><ul><li>22 Plants </li></ul><ul><li>54 Destination Ramps </li></ul><ul><li>~1,200 Load lanes </li></ul><ul><li>~8,400 vehicles waiting at plants </li></ul><ul><li>$166 Million in inventory </li></ul>
    6. 6. The Need for Speed <ul><li>Other Incentives </li></ul><ul><ul><li>Damage </li></ul></ul><ul><ul><li>Flexibility </li></ul></ul><ul><ul><li>Others? </li></ul></ul>
    7. 8. The Price <ul><li>Inventory at the cross dock </li></ul><ul><li>Added distance traveled </li></ul><ul><li>Handling at the cross dock </li></ul><ul><li>Capital costs of the cross dock </li></ul>
    8. 9. 1999 Vehicle Network Delivery Conditions <ul><ul><li>Record production levels </li></ul></ul><ul><ul><li>Demand shift from cars to trucks </li></ul></ul><ul><ul><li>Overburdened rail infrastructure </li></ul></ul><ul><ul><li>Deteriorating rail service </li></ul></ul><ul><ul><li>Shortage of transport capacity </li></ul></ul><ul><ul><li>Mixing centers </li></ul></ul><ul><ul><li>15+ day transit time </li></ul></ul><ul><ul><li>High inventory cost </li></ul></ul><ul><ul><li>Dissatisfied customers </li></ul></ul>
    9. 10. High 1999 Level Statistics <ul><ul><li>Assembly plants 22 </li></ul></ul><ul><ul><li>Mixing centers 5 </li></ul></ul><ul><ul><li>Destination rail ramps 54 </li></ul></ul><ul><ul><li>Dealer locations 6,000 </li></ul></ul><ul><ul><li>Production volume 4.4 Mil./Year </li></ul></ul><ul><ul><li>Freight expense $1.5 Bil. </li></ul></ul><ul><ul><li>Dec. ‘99 avg. transit time 16.8 Days </li></ul></ul><ul><ul><li>Pipeline Inventory $4.1 Bil. </li></ul></ul>
    10. 11. Ford Distribution Network Mixing Center Origin Plant Groupings Destination Ramp Planned Ramp Closure Edison Norfolk Atlanta Kentucky Ohio St Louis Canada St Paul Michigan Chicago Kansas City 15% of all vehicles go Haulaway Direct to Dealer within 200-300 Miles of the Assembly Plant 85% of all Vehicles go via Rail to a Hub (Mixing Center or Destination Ramp)
    11. 12. Old Delivery Design <ul><ul><li>Push Network </li></ul></ul><ul><ul><li>Vendor sub systems optimized for individual segments </li></ul></ul><ul><ul><li>Little to no visibility </li></ul></ul><ul><ul><li>Mixing Centers not used effectively </li></ul></ul>
    12. 13. Ford Goals <ul><li>Speed </li></ul><ul><ul><li>1999: Average 15 days transit time </li></ul></ul><ul><ul><li>Goal: Maximum of 8 days transit time </li></ul></ul><ul><li>Precision </li></ul><ul><ul><li>1998/1999: 37% on time within 1 week </li></ul></ul><ul><ul><li>Goal: 95% on time within 1 day </li></ul></ul><ul><li>Visibility </li></ul><ul><ul><li>100 % Internet vehicle tracking from plant release to dealer delivery </li></ul></ul><ul><ul><li>Guide the flow of vehicles </li></ul></ul><ul><ul><li>Respond to variations </li></ul></ul><ul><ul><li>Inform customers </li></ul></ul>
    13. 14. Design Process <ul><li>Truck vs Rail delivery </li></ul><ul><li>Allocate Dealers (FIPS) </li></ul><ul><li>to Ramps </li></ul><ul><li>Route Flows through </li></ul><ul><li>Rail Network </li></ul>
    14. 15. Single-Sourcing Allocation <ul><li>Var Assign{FIPS, RAMPS} binary; </li></ul><ul><li>Minimize TotalCost: </li></ul><ul><li>sum{fip in FIPS,ramp in RAMPS} Cost[fip,ramp]*Assign[fip,ramp]; </li></ul><ul><li>s.t. SingleSource{fip in FIPS}: </li></ul><ul><li>sum{ramp in RAMPS}Assign[fip,ramp] = 1; </li></ul><ul><li>s.t. ObserveCapacity{ramp in RAMPS}: </li></ul><ul><li>sum{fip in FIPS} Volume[fip]*Assign[fip,ramp] </li></ul><ul><li><= Capacity[ramp]; </li></ul>
    15. 16. Old Ramp Allocation Southern US Dealers sourced by multiple ramps
    16. 17. New Ramp Allocation Southern US Dealers sourced by single ramps
    17. 18. New Allocation of Dealers to Ramps Mainland US
    18. 19. Flows through the Rail Network <ul><li>Objective is NOT Freight cost! </li></ul>
    19. 20. The Objective IS <ul><li>Speed </li></ul><ul><li>Capital </li></ul><ul><li>Land </li></ul>
    20. 21. The Promise <ul><li>Speed </li></ul><ul><li>Unit trains bypass hump yards </li></ul>
    21. 22. The Promise <ul><li>Capital & Land </li></ul>Time Laurel, Montana Orilla, Washington
    22. 23. The Promise <ul><li>Capital & Land </li></ul><ul><li>22 Plants </li></ul><ul><li>54 Destination Ramps </li></ul><ul><li>~1,200 Load lanes </li></ul><ul><li>~8,400 vehicles waiting at plants </li></ul><ul><li>$166 Million in inventory </li></ul><ul><li>Each Plant to One Mixing Center </li></ul><ul><li>~22 Load lanes </li></ul><ul><li>~154 vehicles waiting at plants </li></ul><ul><li>~$3 Million in inventory </li></ul>
    23. 24. The Price <ul><li>Inventory at the cross dock </li></ul><ul><li>Handling at the cross dock </li></ul><ul><li>Capital costs of the cross dock </li></ul><ul><li>Added distance traveled </li></ul>
    24. 25. Making the Trade-offs <ul><li>Measuring Inventory </li></ul><ul><li>In the rail network </li></ul><ul><li>At the plants and Cross Docks </li></ul><ul><li>Load-driven system </li></ul><ul><li>Railcars depart when full </li></ul><ul><li>Relationship between </li></ul><ul><li> Network Design and Inventory </li></ul>
    25. 26. Inventory at the Plants <ul><li>Half a rail car full for each destination </li></ul>Time Laurel, Montana Orilla, Washington
    26. 27. Inventory at the Mixing Centers <ul><li>Half a rail car full for each destination </li></ul>Time Laurel, Montana Orilla, Washington
    27. 28. Workload at the Mixing Centers <ul><li>Unpredictable </li></ul>Rail car holds 5 vehicles Orilla Benicia Mira Loma Laurel Denver Orilla Benicia Mira L. Laurel Denver
    28. 29. Workload at the Mixing Centers <ul><li>Balanced: Only load cars you empty </li></ul>Rail car holds 5 vehicles Orilla Benicia Mira Loma Laurel Denver Orilla Orilla Benicia Mira L. Laurel Denver
    29. 30. Effect on Inventory <ul><li>Inventory at Mixing Center slowly grows </li></ul><ul><li>to just over (ramps -1)(capacity -1) and remains there </li></ul><ul><li>Roughly twice the inventory of before </li></ul><ul><li>Still depends on the number of ramps the cross dock serves </li></ul>
    30. 31. Consolidation for Speed <ul><li>Unit Trains of 15-20 rail cars don’t stop at </li></ul><ul><li>mixing yards </li></ul><ul><li>Trade moving inventory for stationary </li></ul><ul><li>inventory </li></ul>
    31. 32. Model <ul><li>Paths </li></ul><ul><ul><li>Route from Plant to Ramp </li></ul></ul><ul><ul><li>Mode used on each edge </li></ul></ul><ul><li>Demand[ramp, plant] </li></ul><ul><ul><li>Combined demand at ramp for all </li></ul></ul><ul><ul><li>products from the plant </li></ul></ul><ul><li>Variables: </li></ul><ul><ul><li>PathFlow[path]: </li></ul></ul><ul><ul><ul><li>Volume from the plant to the ramp on </li></ul></ul></ul><ul><ul><ul><li>the path </li></ul></ul></ul><ul><ul><li>UseLane[fromloc, toloc, mode] binary </li></ul></ul><ul><ul><ul><li>Did we use the mode between two locations </li></ul></ul></ul>
    32. 33. Model <ul><li>Objective </li></ul><ul><ul><li>Minimize the number of vehicles in the pipeline </li></ul></ul><ul><ul><ul><li>Moving Component (Transit times) </li></ul></ul></ul><ul><ul><ul><li>Waiting Component (Mode Size) </li></ul></ul></ul><ul><ul><li>Minimize PipelineInventory: </li></ul></ul><ul><ul><ul><li>sum{path in Paths} (Total Transit Time)*PathFlow[path]; </li></ul></ul></ul><ul><ul><ul><li>sum{(f,t,m)} (Size[m]/2)*UseLane[f,t,m] </li></ul></ul></ul>
    33. 34. Model <ul><li>Satisfy Demand </li></ul><ul><ul><li>The sum of flows on all paths between a plant and a ramp must meet demand </li></ul></ul><ul><ul><li>s.t. SatisfyDemand[p in PLANTS, r in RAMPS}: </li></ul></ul><ul><ul><ul><li>sum{path in PATHS: Plant[path]=p and Ramp[path] = r} </li></ul></ul></ul><ul><ul><ul><li>PathFlow[path] >= Demand[p,r]; </li></ul></ul></ul>
    34. 35. Model <ul><li>Define UseLane </li></ul><ul><ul><li>For each pair of locations and mode between them write a constraint for each plant and ramp </li></ul></ul><ul><ul><li>s.t. DefineUseLane[p in PLANTS, r in RAMPS, </li></ul></ul><ul><ul><li>(f,t,m) in EDGES}: </li></ul></ul><ul><ul><ul><li>sum{path in PATHS: Plant[path]=p and </li></ul></ul></ul><ul><ul><ul><li>Ramp[path] = r and </li></ul></ul></ul><ul><ul><ul><li>(f,t,m) in PATHEDGES[path]} </li></ul></ul></ul><ul><ul><ul><li>PathFlow[path] <= Demand[p,r]*UseLane[f,t,m]; </li></ul></ul></ul>
    35. 36. Model <ul><li>Large Model </li></ul><ul><ul><li>Lots of Variables: Many Paths </li></ul></ul><ul><ul><li>Lots of Constraints: DefineUseLane </li></ul></ul><ul><li>The LP relaxation is nearly always integral </li></ul>
    36. 37. New Rail Lanes Reduced plant destinations
    37. 38. Final Outbound Rail Network with Carriers Mixing Centers Destination Ramps Union Pacific CSXT FEC BNSF Canadian Pacific Car Haul to Ramp Norfolk Southern Canadian National Edison Norfolk Atlanta Kentucky Ohio St Louis Canada St Paul Michigan Chicago Kansas City
    38. 39. Results <ul><ul><li>Cut vehicle transit time by 26% or 4 days </li></ul></ul><ul><ul><li>$1 billion savings in vehicle inventory </li></ul></ul><ul><ul><li>$125 million savings in inventory carrying costs </li></ul></ul><ul><ul><li>Avoid bottlenecks </li></ul></ul><ul><ul><li>Reduce assets in supply chain </li></ul></ul><ul><ul><li>Improved inventory turns at dealer </li></ul></ul>
    39. 40. Benefits <ul><li>Ford </li></ul><ul><li>Dealers </li></ul><ul><li>Rail Carriers </li></ul><ul><li>Auto Haulers </li></ul>
    40. 41. Benefits - Ford <ul><li>On-time delivery </li></ul><ul><li>Competitive edge </li></ul><ul><li>Cost control </li></ul>
    41. 42. Benefits - Dealers <ul><li>Reduced inventories </li></ul><ul><li>Increased customer satisfaction </li></ul>
    42. 43. Benefits - Rail Carriers <ul><li>Improved equipment utilization (reduced capital </li></ul><ul><li>expenditures) </li></ul><ul><li>Visibility and planning capabilities </li></ul><ul><li>Synergies with existing UPS traffic </li></ul><ul><li>Increased cooperation </li></ul>
    43. 44. Benefits - Auto Haulers <ul><li>Expanded dealer delivery hours </li></ul><ul><li>Visibility and planning capability </li></ul><ul><li>Improved asset utilization </li></ul><ul><li>Increased cooperation </li></ul>
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