MILLIKEN – Domestic Network Lagrange, GA April, 20th 2006 Welcome Tibor Banach, Aixa Cintron, Benedikt Finkenauer, Thilo Frankenhauser, Meeti Saraswat, Narendhra Seshadri 23.11.2018

Current Business Model Demand Distribution Proposed Solution Summary Agenda Current Business Model Demand Distribution Proposed Solution Summary 23.11.2018

Current Network Milliken ships various products such as broadloom, tiles, rugs, mats and chemicals out of their facility in Lagrange, GA Products are shipped via LTL carriers to various locations all over the United States Depending on the size of the shipment, the destination and the service required, Milliken uses a variety of shippers Current Carriers Used: Vaughn load, US Express,Jevic, Trans, Watkin xpress, Brauns, UPS Ground, UPS next day, UPS 2 day air, Fedex standard, Fedex priority, Fedex Saturday For example – if they have a small order that needs to be expedited, they may use UPS next day air 23.11.2018 Current Situation Demand Distribution Solution

Current Network LTL LTL Lagrange, GA Current Situation 23.11.2018 Current Situation Demand Distribution Solution

Problem Outline Current shipments are mostly LTL and parcel Can shipments to the same geo be consolidated via FTL? Is consolidation economically feasible? Where should the consolidation hubs be located? How is service affected by consolidation? c 23.11.2018 Current Situation Demand Distribution Solution

Issues to Consider Can shipments to the same geo be consolidated via FTL? Is consolidation economically feasible? Where should the consolidation hubs be located? LTL TL TL TL 23.11.2018 Current Situation Demand Distribution Solution

Current Business Model Demand Distribution Proposed Solution Summary Agenda Current Business Model Demand Distribution Proposed Solution Summary 23.11.2018

Data Extraction Chemicals and “Miscellaneous” items removed from the demand data Shipments with 0 freight costs removed Demand available in the form of units and yards. Conversion of data to fraction of a 53 ft. trailer: Item Units/Truckload Broadloom 6000 yds Mats 800 units Rugs 700 units Tiles 4800 yds ) freight implies the customer paid for it- no savings acheived by filling trailers with these items. Chemicals may require special handling, and misc items are difficult to convert to TL fractions. Total orders reduced by 1/3 What amount are we talking about for consolidation?4.5 TL Demand aggregated by 3-digit ZIP code Demand averaged by number of days shipped to obtain a daily fraction of TL 23.11.2018 Current Situation Demand Distribution Solution

Demand Aggregation by 3 Digit ZIP Demand pockets near Las Vegas, along the Bay area, in the New england area and around lagrange. 23.11.2018 Current Situation Demand Distribution Solution

Current Business Model Demand Distribution Proposed Solution Summary Agenda Current Business Model Demand Distribution Proposed Solution Summary Can shipments to the same geo be consolidated? The total daily volume is 4.5 truckloads- over a trucks worth go to both the east and west, opportunity for study Needed LTL costs, TL costs Service level must not be compromised, so we’re working with daily average TL #’s Where should the hubs be located, and is it economically feasible? 23.11.2018

Data Preparation for the Model Distances Calculated from Lagrange to all 3-digit ZIP codes of demand points Calculated to and from all 3-digit ZIP codes of demand points Freight Costs TL Costs calculated from existing TL shipments in customer data. LTL Costs calculated for shipments of different sizes and for different distances traveled. For example: TL costs sensitive to distance Shipment Size(TL) Cost Equation 0.001 - 0.002 6.77 + TL* 6819.82 + Dist * 0.0074 <0.001 5.15 + TL* 15290 + Dist * 0.002 23.11.2018 Current Situation Demand Distribution Solution

Restrictions Discard extremely small orders Discard orders that fill over 0.6 of a truck Restrict assignment of demand points to hubs within a 500 mile radius on the west and a 300 mile radius on the east This created two sub-models – one for NE and one for West WEST NE LTL relatively insensitive to distance- so very little savings obtained from parcel size shipments Larger shipments can afford to take a whole truckload 23.11.2018 Current Situation Demand Distribution Solution

Model Decision Variables if customer j is assigned to hub i otherwise xij = if hub i is opened otherwise yi = if customer j is served directly from Lagrange otherwise wj = 23.11.2018 Current Situation Demand Distribution Solution

Model Parameters LTLcij = Less-than-truck load cost for shipping from hub i to customer j TLci = Truck load cost for the shipment that goes from Lagrange to hub i LTLcj = Less-than-truck load cost for shipping from Lagrange to customer j Demandj = Demand of customer j 23.11.2018 Current Situation Demand Distribution Solution

Model  j  i, j  i Min Subject to: xij = binary yi = binary wj = binary 23.11.2018 Current Situation Demand Distribution Solution

Results - North East The model recommends the opening of two hubs in the North East region located at ZIP codes 023 and 231 023 Assigned to 023 (Boston area) Assigned to 231 (Richmond area) Assigned to 302 (Lagrange) 231 302 - Lagrange 23.11.2018 Current Situation Demand Distribution Solution

Annual Savings @ 0.9 TL & 250 Days Results - North East Projected cost savings from consolidation: Hub Ideal TL Current Demand Minimum TL Daily Savings @ 0.9 TL Annual Savings @ 0.9 TL & 250 Days 023 (Boston) 0.9 0.6 0.78 $201.31 $50,326 231 (Richmond) 0.73 0.76 $187.73 $46,932 23.11.2018 Current Situation Demand Distribution Solution

Results - West 850 752 The model recommends the opening of two hubs in the western region located at ZIP codes 752 and 850 Assigned to 752 (Dallas area) Assigned to 850 (Phoenix area) 23.11.2018 Current Situation Demand Distribution Solution

Annual Savings @ 0.9 TL & 250 Days Results - West Projected cost savings from consolidation: Hub Ideal TL Current Demand Minimum TL Daily Savings @ 0.9 TL Annual Savings @ 0.9 TL & 250 Days 752 (Dallas) 0.9 0.35 0.71 $111.41 $27,853 850 (Phoenix) 0.77 0.62 $638.30 $159,576 23.11.2018 Current Situation Demand Distribution Solution

Current Business Model Demand Distribution Proposed Solution Summary Agenda Current Business Model Demand Distribution Proposed Solution Summary 23.11.2018

Summary There is opportunity to consolidate shipments for projected annual savings of $284,687 ($187,429 from the Western region and $97,258 from the North-Eastern region) Orders that can be shipped as parcels or can fill a truck by themselves should not be consolidated with other shipments On any given day, savings can be achieved by consolidating to a hub if the minimum requirement for that hub is met. Eg. 0.71 of a TL for 752 (Dallas) Next Steps: Evaluate vehicle routing options among multiple hubs 23.11.2018

Questions? 23.11.2018