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

2. Current Business Model Demand Distribution Proposed Solution Summary
Agenda
Current Business Model
Demand Distribution
Proposed Solution
Summary

3. 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
Current Situation
Demand Distribution
Solution

4. Current Network LTL LTL Lagrange, GA Current Situation
Current Situation
Demand Distribution
Solution

5. 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
Current Situation
Demand Distribution
Solution

6. 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
Current Situation
Demand Distribution
Solution

7. Current Business Model Demand Distribution Proposed Solution Summary
Agenda
Current Business Model
Demand Distribution
Proposed Solution
Summary

8. 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
Current Situation
Demand Distribution
Solution

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

10. 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?

11. 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
TL* Dist *
<0.001
TL* Dist * 0.002
Current Situation
Demand Distribution
Solution

12. 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
Current Situation
Demand Distribution
Solution

13. 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 =
Current Situation
Demand Distribution
Solution

14. 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
Current Situation
Demand Distribution
Solution

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

16. 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
Current Situation
Demand Distribution
Solution

17. Annual Savings @ 0.9 TL & 250 Days
Results - North East
Projected cost savings from consolidation:
Hub
Ideal TL
Current Demand
Minimum TL
Daily 0.9 TL
Annual 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
Current Situation
Demand Distribution
Solution

18. 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)
Current Situation
Demand Distribution
Solution

19. 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 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
Current Situation
Demand Distribution
Solution

20. Current Business Model Demand Distribution Proposed Solution Summary
Agenda
Current Business Model
Demand Distribution
Proposed Solution
Summary

21. 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 of a TL for 752 (Dallas)
Next Steps: Evaluate vehicle routing options among multiple hubs

22. Questions?