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

2 A.Introduction B.Key Deliverables C.Data Analysis D.Mathematical Model E.Recommendation F.Sensitivity Analysis G.Conclusion Agenda

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

4 Timeline Phase Project kick-off & Deliverables Rationalization Data Cleansing & Validation Preliminary Modeling Validation of Model Generation of results & sensitivity Analyses JanFebMar Apr

5 A.Introduction B.Key Deliverables C.Data Analysis D.Mathematical Model E.Recommendation F.Sensitivity Analysis G.Conclusion Agenda

6 Key Deliverables  Create 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

7 California and Florida Supplier Locations

8 Problem Definition Florida

9 Problem Definition 36% 26% 13% 8% 11% 6% LTL: Greatest Opportunity for Savings

10 Problem Definition Focus on Consolidation of LTL shipments to Florida Eliminated Frozen and Chilled shipments from the Optimization model Included most FTL shipments by breaking them down

11 A.Introduction B.Key Deliverables C.Data Analysis D.Mathematical Model E.Recommendation F.Sensitivity Analysis G.Conclusion Agenda

12 Data Analysis

13 Data Analysis

14 Data Analysis

15 A.Introduction B.Key Deliverables C.Data Analysis D.Mathematical Model E.Recommendation F.Sensitivity Analysis G.Conclusion Agenda

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

17 To Consolidate LTL Shipments into FTL Shipper XYZ Company Shipper CP FTL LTL Present Situation Proposed Solution LTL

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

19 Step 1: Set Covering Model (SCM) Maximize sum(i in Suppliers) y[i] s.t {sum(i in Suppliers) x[i] <= 30; forall(i in Suppliers) y[i] <= (sum(j in Suppliers) Matrix[i,j]*x[j]) Integer Programming Model Model will decide 30 Potential Consolidation Points within 300 mile Radius from Suppliers. To Maximize the Number of Suppliers which can be Covered by the CPs To Generate at most 30 Potential CP locations To Ensure that CPs are within 300 mile radius from Suppliers

20 SCM Results: 30 Consolidation Points Next Step: CP Candidates will be fed into the Network Design Model (NDM)

21 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 Close? To Open or Close? To Open or Close?

22 Objective : To Minimize Total Transportation Costs (Direct shipments + Shipments via opened CP) XYZ Company Shipper Direct LTL Shipment Constraint 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 point CP LTL Shipment

23 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 CP XYZ Company XYZ Company LTL Case 1 CP FTL

24 Step 2: Network Design Model (NDM) CP XYZ Company XYZ Company Case 2 FTL Constraint II: If Supplier is a Candidate CP Case 2: If OPEN We consolidate at CP and send FTL direct

25 Step 2: Network Design Model (NDM) Constraint III: Load Factor of 0.8 Total Inflow into CP < = [ 0.8 * Total Truckloads ] CP 0.8 * Constraint IV: Frequency Minimum Truckloads going through an Open CP per year > = 52 LTL ie at least 1 truckload per week

26 A.Introduction B.Key Deliverables C.Data Analysis D.Mathematical Model E.Recommendation F.Sensitivity Analysis G.Conclusion Agenda

27 5 CP Locations

28 Assignment of Suppliers

29 CP Location I: Charlotte, NC

30 CP Location II: Atlanta, GA

31 CP Location III: Los Angeles, CA

32 CP Location IV: Gulfport, MS

33 CP Location V: Jackson, KY

34 LTL Direct Shipments

35 Cost Savings Less than 8% Reduction 8% Reduction

36 Summary CP Location Truckloads Per Year Volume ('000 lbs) Number of Assigned Suppliers Charlotte NC Atlanta GA Jackson KY Gulfport MS Los Angeles CA Direct LTL--136

37 A.Introduction B.Key Deliverables C.Data Analysis D.Mathematical Model E.Recommendation F.Sensitivity Analysis G.Conclusion Agenda

38 Sensitivity Analysis

39 Sensitivity Analysis Shipments Per WeekCharlotteAtlantaLAGulfportJackson 1☻☻☻☻☻ 2☻☻☻☻☻ 3☻☻☻ 4☻☻ 5☻ 6☻ 7☻

40 A.Introduction B.Key Deliverables C.Data Analysis D.Mathematical Model E.Recommendation F.Sensitivity Analysis G.Conclusion Agenda

41 Conclusion Key Learning –Counter intuitive peculiarities of LTL cost structure (small volumes, backhauling …etc) Moving Forward –“Milk run” study on remaining LTL direct volumes –Optimization of other shipment modes (e.g. parcel, frozen, chilled …etc) –Optimization of Florida bound shipments

42 Q & A